[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND
RELATED AGENCIES APPROPRIATIONS FOR 2014
_______________________________________________________________________
HEARINGS
BEFORE A
SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
________
SUBCOMMITTEE ON AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG
ADMINISTRATION, AND RELATED AGENCIES
ROBERT B. ADERHOLT, Alabama, Chairman
TOM LATHAM, Iowa SAM FARR, California
ALAN NUNNELEE, Mississippi ROSA L. DeLAURO, Connecticut
KEVIN YODER, Kansas SANFORD D. BISHOP, Jr., Georgia
JEFF FORTENBERRY, Nebraska CHELLIE PINGREE, Maine
THOMAS J. ROONEY, Florida
DAVID G. VALADAO, California
NOTE: Under Committee Rules, Mr. Rogers, as Chairman of the Full
Committee, and Mrs. Lowey, as Ranking Minority Member of the Full
Committee, are authorized to sit as Members of all Subcommittees.
Martin Delgado, Tom O'Brien, Betsy Bina,
Pam Miller, and Andrew Cooper,
Staff Assistants
________
PART 3
Page
Commodity Futures Trading Commission............................. 1
Secretary of Agriculture......................................... 393
USDA Research, Education, and Economics.......................... 663
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Printed for the use of the Committee on Appropriations
U.S. GOVERNMENT PRINTING OFFICE
82-638 WASHINGTON : 2013
COMMITTEE ON APPROPRIATIONS
HAROLD ROGERS, Kentucky, Chairman
C. W. BILL YOUNG, Florida \1\ NITA M. LOWEY, New York
FRANK R. WOLF, Virginia MARCY KAPTUR, Ohio
JACK KINGSTON, Georgia PETER J. VISCLOSKY, Indiana
RODNEY P. FRELINGHUYSEN, New Jersey JOSE E. SERRANO, New York
TOM LATHAM, Iowa ROSA L. DeLAURO, Connecticut
ROBERT B. ADERHOLT, Alabama JAMES P. MORAN, Virginia
KAY GRANGER, Texas ED PASTOR, Arizona
MICHAEL K. SIMPSON, Idaho DAVID E. PRICE, North Carolina
JOHN ABNEY CULBERSON, Texas LUCILLE ROYBAL-ALLARD, California
ANDER CRENSHAW, Florida SAM FARR, California
JOHN R. CARTER, Texas CHAKA FATTAH, Pennsylvania
RODNEY ALEXANDER, Louisiana SANFORD D. BISHOP, Jr., Georgia
KEN CALVERT, California BARBARA LEE, California
JO BONNER, Alabama ADAM B. SCHIFF, California
TOM COLE, Oklahoma MICHAEL M. HONDA, California
MARIO DIAZ-BALART, Florida BETTY McCOLLUM, Minnesota
CHARLES W. DENT, Pennsylvania TIM RYAN, Ohio
TOM GRAVES, Georgia DEBBIE WASSERMAN SCHULTZ, Florida
KEVIN YODER, Kansas HENRY CUELLAR, Texas
STEVE WOMACK, Arkansas CHELLIE PINGREE, Maine
ALAN NUNNELEE, Mississippi MIKE QUIGLEY, Illinois
JEFF FORTENBERRY, Nebraska WILLIAM L. OWENS, New York
THOMAS J. ROONEY, Florida
CHARLES J. FLEISCHMANN, Tennessee
JAIME HERRERA BEUTLER, Washington
DAVID P. JOYCE, Ohio
DAVID G. VALADAO, California
ANDY HARRIS, Maryland
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/1/ Chairman Emeritus
William E. Smith, Clerk and Staff Director
(ii)
AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND
RELATED AGENCIES APPROPRIATIONS FOR 2014
----------
Friday, April 12, 2013.
COMMODITY FUTURES TRADING COMMISSION
WITNESSES
GARY GENSLER, CHAIRMAN, COMMODITY FUTURES TRADING COMMISSION
SCOTT D. O'MALIA, COMMISSIONER, COMMODITY FUTURES TRADING COMMISSION
Mr. Aderholt. Good morning. The subcommittee will come to
order.
Before I recognize Chairman Gensler and Commissioner
O'Malia for their opening statements, I would ask the ranking
member of the subcommittee, the distinguished gentleman from
California, Mr. Farr, for any remarks that he may have.
Mr. Farr. Well, thank you very much, Mr. Chairman. I
normally do not read remarks, but I think since there are a lot
of new members on this committee and this is a very complex
issue, I would just like to read my statement.
The Commodity Futures Trading Commission is an unsung hero
of American fiscal stability. Since 1974, the CFTC has
regulated the U.S. agricultural commodity and other futures and
options markets. For 36 years, the CFTC executed its
responsibilities professionally while protecting investors from
fraud on a shoestring budget.
But with the 2010 passage of the Dodd-Frank Wall Street
Reform and Consumer Protection Act, the CFTC's jurisdiction
exploded nearly sevenfold, from $37 trillion to nearly $300
trillion. Make no mistake about it, that increased jurisdiction
was absolutely essential.
The 2008 economic collapse was proof positive that our
financial regulatory oversight failed Americans. The
unregulated swaps market helped concentrate risk in the
financial system, and that risk spilled over into the real
economy. The results were 8 million jobs were lost, millions of
families lost their homes, and thousands of small businesses
had to lock their doors.
Something had to change, and Dodd-Frank mandated that the
CFTC now regulate the $300 trillion swaps market in addition to
its regular role of the $37 trillion agriculture commodities
and other futures market. So it stands to reason that we should
better resource the CFTC to carry out their new
responsibilities.
Unfortunately, that has not happened. The CFTC is still
being funded at $207 million, which is barely enough to cover
its old jurisdiction. If American taxpayers expect the CFTC to
fully carry out its oversight and regulatory responsibilities,
we should be providing them with the $315 million. And to give
that figure some perspective, $315 million is a tiny fraction,
just one-millionth, of the roughly $300 trillion market they
must regulate. You think about that. That is almost a trillion
dollars a day.
While I share the concern of our current economic
predicament, our failure to adequately resource the CFTC so
they can exercise prudent oversight over the swaps market has
far graver financial consequences for our national economy. It
is worth repeating that the price tag for mindful neglect is 8
million jobs lost, millions of families losing their homes, and
thousands of small businesses locking their doors.
There is absolutely no way our constituents and our markets
can withstand another economic tsunami, and they shouldn't have
to. But, unfortunately, those aren't the only costs of
crippling CFTC's funding.
Continued underfunding means CFTC won't be able to conduct
enforcement investigations, and that costs the American
taxpayer real money. In January 2013 alone, CFTC brought in $1
billion in fines and penalties. That is $1 billion that goes
into the U.S. Treasury, not into paying the workload of CFTC.
Put another way, CFTC gave the American taxpayers almost a
fourfold return on their fiscal year 2013 investment.
And here is another cost to underfunding. Since Dodd-Frank,
CFTC has written 43 of 50 new swap market rules.
Understandably, Wall Street has questions about how to comply
with these rules, but the CFTC doesn't have the money to hire
the staff who can respond to these inquiries. And that
understaffing stymies the pace of business, just when we need
to have robust, productive, and transparent markets.
The bottom line is this: The cost of fully funding CFTC is
minor; the cost of underfunding CFTC is enormous. American
taxpayers deserve this minor front-end investment in CFTC to
yield enormous long-term returns.
Thank you, Mr. Chairman.
Mr. Aderholt. Thank you, Mr. Farr.
Let me, first of all, welcome both of you to the
subcommittee this morning and thank you for being here on this
rainy Friday morning to join us. And we look forward to,
Chairman Gensler, your testimony, and also welcome Commissioner
O'Malia for your presence here this morning and look forward to
your testimony, as well.
The Commodity Futures Trading Commission is responsible for
principle-based regulation of the commodities, futures,
options, and swap marketplace. These markets are an integral
part of our Nation's free enterprise system. The CFTC has
received six consecutive annual increases in funding--an annual
increase of 85 percent since the financial crisis of 2008.
There are not many agencies or offices in our jurisdiction in
this subcommittee that have enjoyed that attention. So part of
what I want to focus on today is the taxpayers' return on
investment for these funds and the funds that you have been
entrusted with.
While I realize that the Commission is nearing a point
where most rules under the Dodd-Frank have been written, there
still seems to be many questions about the overreach of some of
these rules. And, quite honestly, CFTC's focus on hiring
additional staff seems disconnected to the reality that most
activity under your purview is being conducted electronically.
CFTC's 2014 budget request is $315 million, an increase of
53 percent over the current CR level. It certainly brings into
question the rationality of such a large request given the
fiscal environment and the reality of the CFTC's funding
history. Further, I believe the best way to examine future
funding is to examine the record.
With that, I would turn it over to Chairman Gensler and
then to Commissioner O'Malia.
Without objection, both of your full testimonies will be
included in the record. And if you would like to summarize in
any way your testimony, hit the highlights, you are welcome to
do so.
So, with that, let me first of all recognize Chairman
Gensler.
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Mr. Gensler. Chairman Aderholt, Ranking Member Farr,
members of the subcommittee, thank you for inviting me to
present the President's budget for 2014. And I am pleased to
testify along with Commissioner O'Malia, who not only is a
fellow commissioner of mine but has become quite a friend over
these last 4 years of rulemaking and oversight of these
markets.
The CFTC's mission is critical, as you and the ranking
member said, to so many in each of your districts. And just
because there are some new Members here, I wanted to mention,
it is the farmers and the ranchers but also the community
bankers, the insurance salesmen, the mortgage brokers, and
commercial companies, all of which we call end-users, if I can
use that broad word.
And why is it important? It is because we oversee the
derivatives marketplace, both historically the futures market,
but now more recently the swaps market. And derivatives are
financial instruments. My mom asks me quite often, Gary, what
is it you do down there? You might have the same question.
Derivatives are financial instruments whereby an end-user tries
to lock in a price or a rate so they can focus on what they do
well.
So your constituents benefit from a transparent and
efficient derivatives market so that they can manage a price
risk, maybe for energy or agriculture, or a rate risk for an
interest rate, if they want to put up a small building in your
district and they want to lock in the interest rate that they
are being charged, or maybe they are importing goods from
another country and they want to lock in a foreign exchange
rate. So whether it is oil, corn, wheat, interest rates, or
foreign currency, they want to get that risk out of the way so
they can focus on growing the economy, providing services and
goods to your communities.
Now, our heritage dates back to the 1920s when we were part
of the Department of Agriculture, and thus we are in front of
this subcommittee and we are overseen by the Agriculture
Committees in both Houses. But since 1975 we have been an
independent commission, and until last year we oversaw just the
futures marketplace. As has been mentioned, though, in response
to the financial crisis Congress directed that we take on a
significantly expanded mission: swaps, which were at the center
of the crisis.
Having completed most of the rules that Congress directed
us to do, this small agency, the CFTC, now oversees both
futures and swaps. These markets are approximately $300
trillion in notional size. This represents $20 of derivatives
for every dollar of goods and services that flows through our
economy. If you fill up a tank of gas for $90, you can think
somewhere in our economy there might be $1,800 of derivatives
somewhere in our economy behind that, just an average. I am not
saying it exactly works that way. Ninety percent of this is in
the newly overseen swaps market, and about 11 or 12 percent of
it is the market we have overseen to date, the futures
marketplace, as measured in notional size.
Now, the public is now beginning to benefit from this swaps
market reform. Until just recently, the swaps marketplace was
opaque, but now it is getting transparency. There is a modern-
day ticker tape like you have in the securities marketplace. We
now have 75 swap dealers that are registered with us. These are
the largest banks around the globe. Now we will be able to
oversee their business conduct and ensure that the markets are
fair to the rest of the public. We have also brought swaps into
something called central clearing. This is a market mechanism
that helps to lower risk to the markets.
Our technology and our staff have not kept up with either
this expanded mission or the paradigm shift that we have seen.
As the chairman mentioned, we did grow in the last 6 years.
That was, in essence, to get us back to where we were in the
1990s. We are currently just 8 percent larger than we were 20
years ago. We had shrunk from the 1990s, down to the bottom in
2008.
So the President's $315 million budget for 1,015 people is
to grow this agency from the 690 people we are at now to try to
oversee a market that is nearly 8 times the size we currently
oversee.
That does not mean we need eight times the resources, for
sure. But we do need additional technology and staff to
effectively promote transparency. We need additional technology
and staff to make sure that people have access in your
district. We need the technology and staff to closely monitor
customer funds. And we need technology and staff to examine the
vast number of new entities registered with us. And I think
additional technology and staff are necessary to utilize our
enforcement tools to the fullest potential.
I will just give one example, which was in the interest
rate markets, in LIBOR. You may have read about the London
Interbank Offered Rate that was being pervasively and readily
rigged, undermining market integrity in the interest rate
futures markets. Millions of Americans have mortgages tied to
LIBOR, and we are the Federal agency that has the--we are the
cop on the beat for this--responsibility for overseeing these
markets.
Hundreds, maybe tens of thousands of small businesses
borrow against an interest rate called LIBOR, and millions of
Americans invest in money market funds that use LIBOR. So it is
a really important thing. And we found three banks pervasively
rigging it. That led to $2 billion--that is $2 billion that
went into the U.S. Treasury in the last 12 months, between the
Department of Justice and our fines.
Now, it is just a point of reference, and it is not how I
would recommend appropriating, but to the chairman's question
about a return to taxpayers, that $2 billion represents the
amount that was appropriated to our agency from 1990 to 2012;
23 years of our appropriations were returned with that $2
billion. I am just trying to address your question.
We are a tiny agency with a tiny enforcement staff that is
approximately the same size as our enforcement staff was in
2002. Pound for pound, we get a lot out of that enforcement
staff, but I do think we need more people, given the vast
markets we oversee. I think the farmers and ranchers, the
community bankers, insurance salesmen, mortgage brokers, and
many, many other end-users in your districts would benefit. And
it is a good investment for the taxpayers' money, though I know
you all have a very hard job. I would not want to switch jobs
and try to make the decisions as to how to allocate scarce
resources. But I think this agency is a good investment for the
taxpayers money.
And I thank you for your time.
Mr. Aderholt. Thank you.
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Mr. Aderholt. Commissioner.
Mr. O'Malia. Good morning, Chairman Aderholt, Ranking
Member Farr, and members of the subcommittee. Thank you for the
opportunity to come and testify on the Commission's budget
request. And I am pleased to be with my friend, Chairman
Gensler.
The Commission is seeking a 52.5 percent increase above the
current-year funding level of 206.5 million. The Commission has
sought similarly large increases in past requests. Although not
provided these full funding increases, additional resources
have been provided, as noted by both the chairman and ranking
member.
In FY 2007, prior to the 2008 financial crisis, the
Commission received just $97.7 million and supported 437 full-
time equivalent staff and 59 contractors. Today, after
consistent funding increases, the Commission is operating at
206 million; or in the sequestration number about 194 million;
and supports roughly 700 staff, as well as 200 contractors,
which is an over 200 percent increase.
Funding for technology also has grown during this time, and
I appreciate Congress setting aside specific funding in bill
language that provides and directs the Commission to focus on
technology. This is a key component of our surveillance and
essential to our oversight program. However, we have a very
long way to go to develop a credible and comprehensive
technology strategy to meet our mission objectives.
I did not vote for the FY 2014 budget request for two
reasons. First, I believe the requested level of 315 million;
an increase of 52 percent, is both improbable and
unsustainable. Second, the budget fails to provide specifics
and makes a broad, unsubstantiated appeal for more resources
without the requisite demonstration of mission priorities or
essential deliverables. The budget request presents everything
as a priority yet provides no metrics by which to measure the
Commission's success or failure.
As a former clerk of the Senate Energy and Water
Subcommittee, I know firsthand the challenges you all face to
allocate scarce resources among agencies and commissions, all
fighting for increases in their budgets. These are not easy
choices, as the chairman noted, and they are made even more
difficult by today's acute budget pressure.
Now, in my position as a regulator, I am working to make
sure that the Commission is a responsible and effective steward
of taxpayer resources. For you to have confidence in our
mission, we must develop a credible, transparent, and specific
budget request that we are able to execute in fulfilling our
statutory objectives.
I do believe there is a strong case to be made for the
importance of our oversight mission of the swaps and futures
markets. I also believe that it is apparent that expanded
mission cannot be accomplished without modest increases in
resources for this Commission.
Since I arrived at the CFTC, each budget request that I
have reviewed, including this one, includes a chart
highlighting the stratospheric rise in futures trading as a
justification for the sizable increase in our budget. It is
abundantly clear that growth in futures trading is strongly
tied to electronic trading, including the use of algorithms and
high-frequency trading systems. Therefore, if the Commission is
going to keep pace with the growth and technology innovation in
these markets, it must make automated surveillance the
foundation of our oversight and compliance program. Automation
provides crucial leverage for our limited staff to oversee
high-speed electronic markets.
I believe there are several important priorities that are
technology-related that the Commission must address
immediately. I would ask that you continue to support separate
bill language that provides for our technology funding. This
specific allocation will keep the Commission focused on its
most critical investments.
Second, the Commission must develop a 5-year strategic plan
focused on technology that requires each division and office
within the Commission to develop a 5-year technology investment
strategy with annual milestones by which Congress can measure
our performance.
This plan should explain in detail how technology and staff
are integrated and should address the following issues. It
should explain how the Commission will expand its surveillance
tools to include message data, instead of relying on already-
stale transaction data. This is critical for us to oversee
high-frequency trading strategies.
Next, it should explain how the Commission will integrate
its oversight of futures, swaps, and options markets and the
execution of those across both the futures exchanges and the
new swap execution facilities. Integrating that and reviewing
that will be a major challenge for us going forward. We also
need to prioritize our technology investments such as risk
analysis and surveillance. We must pick priorities in this
budget to be effective.
Third, the Commission must establish a cross-divisional
data unit to immediately address various data reporting,
aggregation, and analysis shortcomings, as well as to develop
new automated analytical tools. We have established swap data
repositories, and we are beginning to collect data, but we have
a long way to go before we are going to be able to make sense
of that data.
Fourth, we should address the November 14th, 2012, IG
assessment letter which focused on the most serious investment
challenges facing the Commission. And, Mr. Chairman, if you
would, I would like to include that in the record.
Mr. Aderholt. Without objection.
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Mr. O'Malia. The IG identified the following concerns as
serious management challenges: the efficient deployment of
information technology resources and the expanded delivery of
customer protection resources and consumer education.
Fifth, I think we should develop a rule implementation
plan. The Commission is shifting its effort from rule writing
to rule implementation. Providing certainty and clarity to
market participants and facilitating their compliance with our
rules must be a priority. The Commission has provided a
complicated ad hoc set of over 80 exemptions to our rules, the
great majority of them since October, leaving the market
participants confused regarding the application of the
Commission's new rules.
To ensure the Commission is well-positioned to fulfill its
mission objectives, it must develop a technology-focused budget
strategy that can justify the need for additional funding for
the Commission. I am committed to working with this
subcommittee to identify key investments that will enhance our
capacity to oversee the markets through the use of technology.
Thank you for the opportunity to testify here today.
Mr. Aderholt. Thank you.
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Mr. Aderholt. Thank you both for your testimony.
And we will go ahead and get into the questions. We will
have a series of votes in probably another hour, so we should
get at least one round, if not perhaps two rounds, of
questioning in before then.
As I had mentioned--Chairman Gensler, let me start with
you--as I had mentioned in my opening comments, the Commodity
Futures Trading Commission request for fiscal year 2014 is 53
percent above what the agency currently receives. Since the
financial crisis of 2008, CFTC has received an 85 percent
increase in funds. In total, CFTC has received 833 million in
taxpayer dollars since that crisis.
Looking at the American taxpayers and what they get for
their money, how much money has CFTC obtained in orders
imposing sanctions and other penalties in fiscal year 2012
through enforcement sanctions?
CFTC PENALTIES
Mr. Gensler. Mr. Chairman, I might need to get back to you
with a specific number, but just in the cases related to
interest rate benchmarks, between the Department of Justice and
our actions, it was $2 billion from June of last year to this
February or March.
So in fiscal 2012, the first piece of that was the Barclays
case, which was a $200 million fine from us and $150 million
from the Department of Justice. But I will get the full number.
Ah, here it is. Very good work.
Last year, in 2012, was penalties collected, $258 million.
Mr. Aderholt. How much in customer funds were missing in
fiscal year 2012?
Mr. Gensler. Again, we might need to get back to you
because the Peregrine failure, the funds in that circumstance
are still being sorted out by the bankruptcy judge and so
forth. But there was close to a $200 million shortfall in
Peregrine during fiscal 2012.
And then in the earlier circumstance of MF Global, I am not
participating in it, but I believe maybe Commissioner O'Malia
could comment on that.
Mr. O'Malia. The trustees are working through the final
solutions. And I believe we had a $700 million hole overseas
that is being clawed back, and I think overall customers have
received up to 80 percent of the funds back.
Mr. Aderholt. But as far as a ballpark figure as far as the
funds that were missing in 2012, do you have a ballpark of what
that might be?
Mr. Gensler. I think it might be easier for us to get back
specifically, but the Peregrine situation was initially as much
as $200 million. But then the actual available is somewhere
between 30 and 40 percent, so it would probably be more like
$150 million.
And then Commissioner O'Malia might do the estimate on the
other one.
Mr. O'Malia. I think the initial hole in MF Global, is $1.5
billion, and then we have brought some of the funds back. So I
think it is best that we provide you final numbers.
Mr. Aderholt. We had some numbers of somewhere in that
ballpark, 1.5, 1.8. Would that be reasonable, that that could
be----
Mr. Gensler. Well, in any circumstance there is an amount
of customer funds, and then there is the actual, under the
trustee and bankruptcy provisions, how much actually is there,
which takes time. So I think you may be referencing the initial
numbers as contrasted to how much has come back through----
Mr. Aderholt. Yeah, the initial numbers is what I am
looking at, or what my question is, the initial numbers.
Mr. Gensler. I see. But the actual shortfall might be what
we were talking about.
Mr. Aderholt. Okay. But as far as initial numbers, 1.5, 1.8
would probably be somewhere in the neighborhood of what the
number that we are talking about?
Mr. O'Malia. Yes, that is correct.
Mr. Aderholt. I see my time--and I know we have a couple of
Members that will have to slip out, so let me recognize
Congressman Farr.
Mr. Farr. As long as we are talking about swaps, I am going
to swap my time with Mr. Bishop, who has to go to MILCON.
INTERNATIONAL TRANSACTIONS
Mr. Bishop. Thank you very much, Mr. Chairman.
And thank you, Mr. Farr, for yielding to me.
And welcome, gentlemen. And I will be brief, and I
apologize because I have to leave.
I kind of want to talk with you about the separate rules
that are in place for the CFTC and the SEC governing
international transactions. So for Chairman Gensler and
Commissioner O'Malia, I have a question for each of you, and I
will try to be very brief with it.
Chairman Gensler, both CFTC and SEC have been separately
involved in developing new rules governing the extraterritorial
application of Dodd-Frank. There is a considerable amount of
concern expressed not only by the industry but by Members of
Congress, as well, as to why the CFTC and the SEC won't
consider issuing joint regulations in this regard, avoiding
duplications or contradictory regulatory obligations for
international market participants.
So could I get you, Chairman Gensler, to explain to the
subcommittee what the justification is for the two separate
sets of rules in this regard when possibly one might work?
And then for Commissioner O'Malia, quickly, it is my
understanding that the CFTC has proposed a swap execution
facility regulation that would require customers to solicit
prices by issuing requests for quotes from a minimum of five
market participants. The SEC has proposed a different rule that
will permit the SEFs to naturally evolve their execution
mechanisms for the swaps that are widely traded.
Do you support the efforts to modify the original CFTC
proposal? When do you expect CFTC to act to consider the final
rule related to the SEFs?
So, gentlemen, thank you.
Mr. Gensler. I thank you for the question.
The cross-border application of these rules is critical, in
that risk knows no geographic boundary. And in the midst of the
crisis, whether it was the big insurance company AIG, whether
it was Lehman Brothers, whether it was Citicorp, or many years
ago a hedge fund called Long-Term Capital Management, often the
risk was offshore and it came back here to affect our markets.
In one recent downturn in which AIG was a central actor--8
million people lost their jobs. AIG was operated out of London,
out of the Mayfair neighborhood, still the U.S. taxpayers put
$180 billion into it. It is remarkable that that risk comes
right back here.
So why might we be different than the Securities and
Exchange Commission? At least two reasons. One is the law is
different. Dodd-Frank actually put expressly a provision in for
the extraterritorial reach of swaps but not securities-based
swaps. Literally, Congress put different words in the statute.
And we are seeking to interpret that. Two is we oversee the
interest rate swaps markets, the credit markets, and so forth,
95 percent of the overall swaps markets. The SEC has an
important but smaller piece, about 5 percent, around single-
named credit default swaps.
This is what we do as a jurisdiction. The SEC has so many
other things to be done. We are nearly complete with our
rulemakings and need to complete this cross-border application.
If we don't cover JPMorgan and Morgan Stanley and Goldman Sachs
and Bank of America and other major financial firms operating
out of offshore venues, if we don't cover U.S. hedge funds with
a P.O. Box in the Cayman Islands, if we don't cover them in
some way, you may as well repeal Title VII of Dodd-Frank, and
the American public will not be protected.
So I think that to shackle us and to do joint rulemaking
with the SEC would be sort of the equivalent of saying we are
not going to cover all these major institutions offshore. We
think we can look to comparable regulations in London and Japan
and Toronto and so forth to cover, but not all 180
jurisdictions around the globe have comparable regulations.
And on swap execution facilities, I think it is a matter of
promoting the best pre-trade transparency to help the markets.
But I know that question was more for Commissioner O'Malia.
SWAPS EXECUTION FACILITIES
Mr. O'Malia. If I might touch on the extraterritoriality
definition, it would be extraordinarily difficult if we had two
different definitions of how the rules should apply and who
should they apply to--what is the U.S. person. To have two
agencies here in the United States defining a U.S. person, I
think, would send a mixed message to the market, and it might
be more difficult to enforce.
With regard to the swap execution facilities, the SEC has
put out its draft plan. It does have a different requirement.
Now, the Dodd-Frank Act did not specify a number. It had some
flexibility for us to select a number. So right now the
proposal is at five. We have received a number of comments and
concerns regarding that as being overly restrictive, and that
it might limit liquidity and price formation. But we have to
debate that. It is a rule that is currently before the
Commission, and I want to make sure that we follow the statute
on that one and make sure that we have good, flexible rules.
I want to make sure that everybody has the opportunity to
get on a SEF. I think trading on a screen is going to be better
for our markets. And I think we have to have good, flexible
rules, especially early, to accommodate this new market. And I
want to make sure that we leave no excuse for them not to come
on to our markets.
Mr. Bishop. Thank you.
Thank you for accommodating me.
Mr. Aderholt. Mr. Yoder.
INTERPRETIVE GUIDANCE
Mr. Yoder. Thank you, Mr. Chairman.
Appreciate your testimony today, gentlemen. Thanks for
coming today. And I wanted to continue the conversation that
Mr. Bishop was having, and I appreciated both of your answers.
Mr. Gensler, in your answer, I think you make very clear
that you feel that the responsibilities are unique enough that
we need to have different rules. And I think that position is
one that certainly is being debated and one that there are
different opinions on. So I certainly respect your opinion. I
disagree a little bit in the approach.
And I wonder if you could speak to why the CFTC chooses to
do a guidance as opposed to a rulemaking, which provides more
opportunity for public comment, more opportunity for debate on
the Commission, and to have that opportunity for the folks that
are going to be impacted by those decisions to have an
opportunity to be heard as part of that. And do you feel that a
guidance would protect our consumers in this country better
than a rulemaking process in this situation?
Mr. Gensler. We had 50 or so places in Dodd-Frank where we
were directed to do rules, and we have taken them up with
vigor. Though we were asked to do it in a year, we didn't want
to do it against a clock, but it is about 3 years in and most
of those rules are completed.
In this cross-border area, as well as three or four other
areas, there were words that market people came in and said,
will you interpret them? This was not the only time we did
this. So we addressed ourselves through an interpretation and I
think, Congressman, did exactly what you would hope we would
do, is we put that interpretation out to public comment last
July. We have gotten an enormous set of input.
And, in fact, what we put out to public comment was largely
based on the input from the market participants beforehand,
laying out an approach to ``U.S. person,'' laying out an
approach to where our rules would apply and not apply and,
importantly, to something called substituted compliance.
So I do think that we have benefited from rounds of public
input. In fact, in December, we put part of it back out to
further comment and asked further questions about this
definition of ``U.S. person'' so that we can get the best
input. So I think we are doing what you would hope we would do
and get public input.
Mr. Yoder. If I might, do you then feel that the rulemaking
process, which includes the added protections of the
Administrative Procedures Act, is less safe than using
interpretive guidance?
Mr. Gensler. No, we are actually using the Administrative
Procedures Act to do this interpretation. So we have benefited
from the public input----
Mr. Yoder. Mr. Chairman, if I might----
Mr. Gensler. I am sorry.
Mr. Yoder [continuing]. As related to a rulemaking versus a
guidance in this regard.
Mr. Gensler. I think that the Administrative Procedures Act
helps us in rulemaking and interpretations. This was a
situation where somebody said, can you interpret these key
provisions of section 722(d). It is this section about what has
a direct and significant effect on U.S. commerce, therefore
what is the scope of regulation.
So I think there are both rules and interpretive guidance.
We didn't have to seek public comment, but we thought that that
was the right thing to do, and we have really benefited. Then
we sought further public comment, as well, in December.
Mr. Yoder. And then I want to get Mr. O'Malia's response on
that, as well. But regarding the other topic, the SEC and
CFTC's coordination on this issue, your stated emphasis on
being more particular at the CFTC on having distinct guidances
that might be inconsistent with SEC or distinct from SEC rules,
do you think that the coordination and the increased ability
for the SEC and the CFTC to be on the same page is somehow more
dangerous than less coordination between the two agencies?
Mr. Gensler. Well, we have had tremendous coordination from
the very beginning when Dodd-Frank passed. We have shared with
the SEC our drafts, our term sheets. We meet with the SEC
consistently and in international forums. I look forward to
working with Mary Jo White, but Mary Schapiro and Elisse Walter
and I have traveled to Brussels and London and Paris and
Toronto together to so many meetings. And on these cross-border
issues, we actually participate through IOSCO together.
So there is much that we have actually done together, but
there will be some differences because the securities markets
and the futures markets do have some differences and also
because the law in this circumstance was written slightly
differently. But we do greatly benefit from the work with the
SEC.
Mr. O'Malia. Well, on this issue, we do have a difference
of opinion in terms of our process. The chairman is correct, we
did put out guidance in order to flesh out some of these
details, and we did apply a comment period that is consistent
with the Administrative Procedures Act.
Now, I would have preferred we went out straight with a
rule. I think we have been very specific, and we have done very
specific rule-like activities in this guidance. And I would
have preferred that we would have fully embraced the
Administrative Procedures Act for rulemaking and worked under
those guidelines.
There are several things that are in here that are more
specific, and yet they are in guidance. And I also think that
we have also missed some opportunities to be more specific. The
chairman is correct that the standard of direct and significant
should be interpreted. The way Congress drafted that language
was a limitation on our authority. You can only apply your
rules to the extent it has a direct and significant impact on
our economy. Now, we have applied that to be from the first
trade, essentially. We have had no finding. What does it mean
to be direct and significant? We never described that.
The next step--which really has become the crux of the
debate between international regulators, and you have probably
seen some of the responses from some of the international
regulators, our counterparties, if you will--is substituted
compliance. Where does our authority stop and theirs begin? How
are we going to draw the lines and respect their jurisdiction
and work within our own jurisdiction?
This has a huge impact, obviously, as you make decisions
regarding our budget. Where our jurisdiction stops and starts
and how we are going to be traveling the world enforcing our
oversight will have a big impact. International travel and
accommodation, that has a big impact on our budget. It is not
specified what that would be in this budget request going
forward, so it makes your job that much more difficult.
Mr. Yoder. Thank you.
Thank you, Mr. Chairman.
Mr. Aderholt. Mr. Farr?
Mr. Farr. Rep. DeLauro, do you want to go?
Mr. Aderholt. Do you want to yield to her?
Mr. Farr. Sure.
EFFECT OF BUDGET CUTS
Ms. DeLauro. Thank you.
Welcome. It is good to see you again before the committee.
And delighted to welcome you, as well, Mr. O'Malia.
Chairman Gensler, you know the Budget Control Act set
budget caps through 2021. They are estimated to cut nondefense
discretionary spending by roughly 5.4 percent in real terms. If
a long-term budget deal is not made, sequestration and the
budget caps will cut nondefense discretionary spending by a
total cut of 10.6 percent below the 2012 level.
Your budget request is impossible to be met under those
circumstances; is that correct?
Mr. Gensler. That is a choice for this committee and
Congress, as to how you allocate. But under those types of
cuts, it gets a lot harder, a lot harder for you, for sure.
Ms. DeLauro. And we don't know whether or not there will be
a $6 million surplus, as is currently said that there is. Is
that right, Mr. O'Malia?
Mr. O'Malia. I think we had $6 million in carryover
balances.
Ms. DeLauro. Carryover balances.
Mr. Gensler. Oh, yes, from 2012, we carried over----
Ms. DeLauro. You may not have that luxury.
Mr. Gensler. I think at the end of this year--we have been,
I think, cautious and prudent that we have been able to plan
that we are not going to have furloughs through September 30th
but, in part, because we carried over $6 million from fiscal
2012 into fiscal 2013. We will not have that type of carryover
into fiscal 2014. And I think, absent some real help from this
committee, we will be in a furlough and maybe even a RIF
situation.
Ms. DeLauro. Okay.
What will happen to your oversight of the swaps and
commodities market in the next decade if these cuts remain in
place? In your view, are we setting ourselves up for another
financial crisis?
Mr. Gensler. Well, I don't know about crisis, but I would
say this: We cannot effectively ensure for the transparency and
the integrity of the markets at significantly fewer people than
we have now and significantly less technology than we have now.
And under the current numbers, we would have to continue to
shrink.
Ms. DeLauro. Will these cuts limit your ability to properly
oversee the swaps market? Will we see fewer enforcement actions
like your recent engagement regarding the LIBOR scandal?
And may I offer congratulations on the LIBOR scandal and
the work of yourself and the Commission.
The questions, though, are: ability to properly oversee the
swaps market; will you see fewer enforcement actions like the
effort with regard to LIBOR?
Mr. Gensler. We always have to prioritize and use
taxpayers' money prudently and effectively, but as resources
shrink, we certainly--there are more challenging, interesting
cases in front of our enforcement division every day partly
because of our expanded scope to swaps. And as the chairman
said, even as you move to electronic trading, there are still
very interesting and complex items that come to our attention.
We have a new whistleblower program, as well.
And so, in making those priorities, we have to sometimes
delay justice. What that old line was, justice delayed is
justice denied.
Ms. DeLauro. Right.
So if we don't, for a third year in a row, provide you with
the resources to complete your congressionally mandated
expanded mission, what won't get done? How will your oversight
of the swaps and futures markets be curtailed?
Mr. Gensler. We don't have enough people to examine the
major clearinghouses that Congress said we have to go in
annually for examination. Customer funds, as the chairman and
all of us know, last year we had these two major circumstances.
We have to do a better job at the CFTC and at the self-
regulatory organizations with regard to customer funds and
actually go in, I think, and help with more examinations as
well. We won't have the resources for enforcement.
And all that Commissioner O'Malia said that I agree with,
most of it, about technology, we won't have the resources for
that technology for analyzing the data, taking the data in, and
helping the public see that data in relevant aggregate forms.
Ms. DeLauro. Uh-huh. Uh-huh.
My time, well, it is up, so I am hoping that we will get to
a second round. Thank you.
MARKET PURPOSE AND VOLATILITY
Mr. Aderholt. Mr. Fortenberry?
Mr. Fortenberry. Thank you, Mr. Chairman.
Good morning, gentlemen. Thank you for your testimony.
Since, Chairman Gensler, you began with some basics, I
would like to start out with a basic question, as well.
Given that the fundamental purpose of the futures markets
and swap markets are to mitigate risk, derivatives market are
to mitigate risk, given that the traditional number of hedgers
to speculators is inverted, and given the explosion of the swap
market, are these markets actually achieving the end result of
decreasing volatility by mitigating risk?
Mr. Gensler. It is an excellent question that academics
address themselves, and you have some on both sides of that
debate.
I think that we are not a price-setting agency at the CFTC.
Our key goal and mission is to ensure that the prices in that
market reflect the forces of supply and demand. And though, as
you rightly say, in some of the markets, 80, 85 percent of the
markets are non-producers, non-farmers and -ranchers and -
merchants; they are financial companies. Sometimes they are
swap dealers, sometimes they are pension funds, sometimes they
are hedge funds, but a significant amount is non-producers and
-merchants.
I think that adds to the reason why you want an effective
CFTC, to ensure that there is not fraud and manipulation, that
those markets competitively reflect the forces of supply and
demand. And I fear that if we were to not get additional
resources, it is harder to ensure for the integrity of these
markets.
Mr. Fortenberry. Would you care to comment on this
proposition as well?
Mr. O'Malia. Well, it is something that we have been
looking at. The markets are changing. We have heard from
producers frequently that I don't feel that these markets fit
me as well as they did in the past. And that is a real concern.
When producers and hedgers say that they don't feel comfortable
in their own markets which were created for them, that is
troubling and that bears investigation.
We are using a technology advisory committee, which I am
the chairman of, to dig into that, to look at some of this
trading, how the markets have evolved and what is driving the
change in the markets. They are electronic. They are moving at
high speeds. And people are very concerned about the high speed
of orders coming into the market and the decreasing size of the
trades. And they don't feel that, in many respects, the hedgers
are getting a fair deal. We have heard that. We want to
investigate it, and we are going to get to the bottom of that.
And we are going to use the technology advisory committee to
investigate that.
Having said that, one area of technology where I think we
need to focus, which we are not doing today because of the
shift from technology to personnel, is in the order data. I
think that is an area where the high-frequency traders and
automated traders execute their strategies. And it is the order
data that we should be looking at, and that is useful to us to
understand how this has changed the markets for hedgers. The
data we receive today is stale. It is transaction data. We can
do a better job of understanding the impacts that people are
facing in the market today.
Mr. Fortenberry. Well, I encourage you, as you guide this
technology committee, to stay tethered to the fundamental
purpose that these markets exist. The reason is that they are
supposed to decrease volatility by mitigating risk, not
increase volatility by creating products that are spinoffs that
are so complicated no one can understand and they take advanced
algorithms where there is a time delay before it can be
unpacked by the regulator or anybody else who has a legitimate
use for hedging risk.
I mean, I think we all have to continually remind ourselves
that that is why we are doing this.
Mr. Gensler. I agree with you, Congressman, that the reason
to have this agency and why it was set up, why our predecessors
were set up in the Department of Agriculture so long ago was to
make sure that a farmer can lock in the price of corn at
harvest time, as you say, and then focus on their crop; and, in
the modern day, that a small business can lock in whether it is
an interest rate or currency and say, good, now I can focus on
what I do well and innovate in my----
Mr. Fortenberry. Right.
Well, I will close with a quick anecdotal story. In the
midst of the financial crisis, I had one of our Chamber groups
out here with some bankers, and I asked them a question. I
said, how many of you use synthetic collateralized debt
obligations? They didn't know what I was talking about. And I
said, thank you.
Because, again, the basics of these markets center around
three fundamentals. It is capital, time, and interest rates.
That is it. It should be basically that simple, going back to
the fundamentals.
Mr. Gensler. I agree. I grew up, my dad had a small
business in Baltimore, and he never used collateralized debt,
you know, et cetera.
Mr. Fortenberry. If I could summarize your two positions,
though--right quick, Mr. Chairman, if you will indulge me for a
moment more--given the explosion of the swaps market, the
derivatives market, your job is made more complicated, you need
more resources, particularly on the technology.
Mr. O'Malia, you agree with that basic proposition, but you
are urging the Commission to state the specifics more clearly
and how the outcomes are going to be measured.
Is that a fair summary?
Mr. O'Malia. It is.
Mr. Gensler. I think so.
Mr. Fortenberry. Thank you, Mr. Chairman.
Mr. Aderholt. Mr. Farr.
IMPORTANCE OF THE CFTC
Mr. Farr. Thank you, Mr. Chairman.
This discussion can be seen as awkward because you are
coming in and asking for a 52 percent increase in a climate
where all we are doing is cutting, squeezing, and trimming
everything. We realize that you can't do that across the board.
We just gave a multibillion-dollar increase to the Defense
Department, gave them flexibility with how to spend it. You
have a lot of people trying to beat up on you because you are
setting regulations in a field where some of these people don't
want to be regulated.
There are really people out there in the market who are the
beneficiaries, the market participants, who need those
regulations. And I wondered if you can give us some specific
examples about the importance of having a well-resourced CFTC
as it applies to market participants.
Mr. Gensler. As Congressman Fortenberry was talking about,
whether it is a small business that is just now entering into
an interest rate swap to help put, you know, a $5 million or
$10 million business, a building, or even a $1 million building
in a community, they often use an interest rate swap with a
community bank. And we have made sure in our rules that that
community bank didn't have to bring it to central clearing.
That community bank and that small business in that
community will benefit from the transparency in the marketplace
and get better pricing. And even 1 basis point or 2 basis
points on an interest rate swap adds up. In a $300 trillion
marketplace, even 1 basis point, that is 1/100th of 1 percent,
is $30 billion a year to the U.S. economy. So it is because of
the law of large numbers that it can benefit.
And then, of course, our traditional markets, in the energy
markets and the agricultural markets, it is for the local
utility company, it is for the farmer or grain elevator
operator to have confidence that the market is free of fraud,
manipulation, and they can have some confidence that the price
set there is not manipulated.
In the LIBOR circumstance, we found that it was rigged,
pervasively rigged, by large banks. That was not good for the
American economy, it was not good for the small-business person
who just says, hey, I want a fair deal, I want to know my
interest rate was--I know I am not going to set the interest
rate, but I want to know that the forces of the market set the
interest rate, not a few bankers rigging a market.
Mr. Farr. So 52 percent is how much of an increase?
Mr. Gensler. It is $109 million. And that 109 is hard for
this committee to find, I know. And whatever your allocation
you get from the full committee is going to be less, probably,
than you would like, and so it is a hard ask. But I do think it
is a good investment. It is a shame you can't count any of our
penalties and fees against this committee's allocations.
Mr. Farr. I don't know of any regulatory agency that is
allowed to keep its fines and fees. But they have fees they can
keep, but not fines, right?
Mr. Gensler. No, we are a little bit unusual. The
Securities and Exchange Commission and we still come to
Congress. That is part of our constitutional system. We come
and make our case for appropriations. But the bank regulators
and the consumer finance board and so forth are not in the
appropriations process, so they are sort of outside.
And I enjoy my time in front of this committee. I just wish
I could make a better case and that you had more flexibility.
USER FEES
Mr. Farr. Is there a fee structure, though, that would be
appropriate for the CFTC to fund itself--like the FDA?
Mr. Gensler. I believe, though it is not in our budget,
that the President this year, as he has in the past--and I
believe President Bush did in his time, too--recommended some
fees to be collected on transactions to help defray the cost of
our agency. If that is something this committee and the
authorizers wanted to work on, we would look forward to working
with Congress in any way that you thought was appropriate.
Mr. Farr. Thank you.
Thank you, Mr. Chairman.
Mr. Aderholt. Thank you.
Mr. Nunnelee.
SEQUESTRATION
Mr. Nunnelee. Thank you, Mr. Chairman.
Commissioner, just describe for me briefly your planning,
say, in the 6 months leading up to sequestration. What did you
do? How did you prepare for it?
Mr. Gensler. We spent a lot of time with our executive
director, our head of technology, and our human resources folks
thinking through, if sequestration were to happen, what does it
mean for us?
And so we consciously were conservative about back-filling
staff, and we let that sort of taper off about 4 or 5 percent
into sequestration. We were aware also that we came into the
year with some modest carryover because you were good enough at
this committee and elsewhere to give us 2-year money.
So, fortunately, we weren't in a position that so many
other agencies had to furlough. But I don't think that would be
the case coming in 2014. We sort of have enough to get to that
point.
I hope that answers your question.
Mr. Nunnelee. Mr. O'Malia, do you have anything to add to
that?
Mr. O'Malia. Well, obviously, coming here and asking for
increased technology budgets and the importance of that to
integrate into our oversight program, it gets a little
frustrating when we have to shift technology resources to
consistently cover staff increases. I understand completely
that we can't operate this commission without the staff.
However, picking priorities and making certain going forward in
tough budget environments that we are going to be able to use
technology in a very important and leveraged fashion to enhance
the capability of staff would be useful.
Congress has given us the flexibility, so I respect that.
But I hope going forward that we continue to make sure that
that is on equal footing--in fact, a priority of our
enforcement and oversight program.
ENFORCEMENT
Mr. Nunnelee. Chairman, it is my understanding that in
testimony before one of the Senate committees you said, in
response to a question about sequestration, that you have
shelved some cases. And you made a comment recently that one
could easily blow a hole in the bottom of reform like a gaping
hole in the bottom of a boat.
So isn't shelving these cases actually blowing the hole in
the bottom of reform?
Mr. Gensler. We are constantly faced, as any law
enforcement agency is, with making priorities as to which cases
to pursue. But what we have found, because of the financial
crisis of 2008 and because of the passage of Dodd-Frank and
some of the changes in the marketplace, that we are
increasingly faced with complex cases, complex investigations
and we don't have sufficient staff to address them.
It is not as much related to sequestration as just,
generally speaking, we have--I think our enforcement staff,
about 154 people, is about where it was 11 years ago. And with
the crisis and the passage of Dodd-Frank, we have an
overabundance of complex cases in front of the agency, as these
LIBOR cases have shown.
In terms of blowing a hole in Dodd-Frank, that was more a
reference on this cross-border area because there are 188
jurisdictions around the globe. Most of the large U.S.
financial institutions have between 2,000 and 3,000 legal
entities. And they can just drop a legal entity in some
jurisdiction, whether it is the Cayman Islands or Mauritius or
somewhere, and do their business there if they wish. But then
the risk comes right back here. That is what happened in AIG
and these other circumstances. So that was the reference I was
making.
Mr. O'Malia. With all due respect on enforcement, we have
taken a very aggressive stance. I think in your budget on page
25, you will see that we have filed a record number of cases,
pursued a record number of investigations, and, as we have
discussed, issued a record number of penalties. We take
enforcement very seriously. We are pursuing Dodd-Frank
enforcement today.
So we have a very robust and aggressive enforcement
program, and that is appropriate. I have not been told by our
director of enforcement that we are giving up cases due to
budget constraints.
Mr. Nunnelee. Thank you.
Thank you, Mr. Chairman. Yield back.
TECHNOLOGY
Mr. Aderholt. Commissioner O'Malia, let me address this
next question to you.
First of all, with a marketplace that trades 80 percent
electronically and the Commission already at record high
staffing levels, I wanted to take a look at the Commission's
current standing on technology. Of course, you chair the
technology advisory committee of the Commission, so I wanted to
particularly point this to you.
For the last 3 fiscal years, this committee has fenced off
$147 million for technology. To the committee's dismay, the
Commission has transferred $31 million from IT to pay for staff
and also for other purposes. In 2011, CFTC told the committee
that over 5,000 forms per quarter, or 20,000 per year, were
received via hard copy and entered into a database by hand.
With 82 percent of the Commission's staff being paid more than
six figures annually, this seems to be an astonishing waste of
resources.
As chairman of the CFTC's technology advisory committee, as
I mentioned, can you tell me if the Commission has made any
improvements in using technology processes to replace costly
and burdensome hand-entry methods?
Mr. O'Malia. Thank you very much for that question.
When I first arrived at the Commission, I was astounded to
find out that we were receiving many of our forms via facsimile
or PDF. That is an electronic version, but it doesn't
automatically populate our surveillance systems. And in the
21st century, surveilling 21st-century markets that trade at
microseconds, it is unacceptable that we have a fax-based form
and compliance program. There are too many errors. It is too
labor-intensive for us to receive faxes, enter in the data, and
then begin to do our analysis. The forms should automatically
populate our systems.
I raised that in the very first year that I arrived, and I
think we have actually made significant progress through modest
increases in technology that this committee has provided to
focus on that.
Now, we have a very long, long way to go before we are in a
position to have a 21st-century electronic surveillance
program. And with Dodd-Frank, that changes that even more, to
integrate the swaps and futures markets to really understand
how people trade and operate. We are making progress, and I
think that is why technology has to be absolutely our top
budget priority.
Let's talk about a 5-year budget plan that really lays out
the strategy going forward. This budget tells you exactly what
we have done in the past. It does nothing to tell you about
where we are going in the future, and that is our real
shortcoming. What is it going to take to be a 21st-century
technology-based regulator? How many people, what kind of
systems, and when can we install it? And how much is it going
to cost? That is what you need to know. That is what we need to
know.
Where in this budget is technology a priority? You cannot
see any priorities in this budget. Everything is a priority.
And, therefore, it is going to be difficult if you have limited
resources or are concerned about sequestration cuts or modest
increases. How are you going to apply them? What comes first?
What comes second?
It is a very difficult balance, but we are not giving you
the tools and information you need to make well-informed
decisions about how much this is going to cost and where we are
going to be in the next 5 years.
Mr. Aderholt. Chairman Gensler, would you like to add
something?
Mr. Gensler. I agree with Commissioner O'Malia that we have
made progress but we are not where we need to be.
Of this approximately $195 million that we have this year,
that is with sequestration, approximately $63 million or $64
million, or one-third of it, is technology. Now, that
technology is sometimes outside services; some of that
technology is our in-house full-time equivalents. But about $63
million or $64 million of the $194 million.
So there is no disagreement here that we need to keep
bolstering and moving forward on technology. We do actually get
daily transactions and daily open interest electronically. But
Commissioner O'Malia is right and the chairman is right; we
need to continue to make progress on other forms that need to
be electronically populated and so forth.
And I think that that total of $63 million internally and
externally spent on technology, we have requested closer to
$100 million out of the $300 million total, will be well-used
if we are able to get part of it or all of it.
Mr. O'Malia. If I may, in my testimony I have broken out
how we spend the $102 million on technology. And it took some
work to get it out of this budget document because it actually
isn't explicit in this budget document. You can't really tell.
And we have asked. We are working with staff.
$102 million breaks down to roughly 76 cents of every
dollar we are spending goes to staff. That is people. Now,
again, you cannot run a technology program without people
servicing it. Fifty percent of the overall technology budget
fundamentally goes to just keeping the lights on. That is
running our telephone system, our network, which of course is
essential, BlackBerrys, laptops, you name it, desktops,
copiers. That is in that budget, too.
So when you think about where we are going for Dodd-Frank
and what we are going to tackle going forward, you really need
to separate out and understand how much we are actually
applying to Dodd-Frank. As best as I can calculate, it is
roughly $12 million that is actually going to hard technology,
software, of the $102 million for Dodd-Frank technology
initiatives. That is not enough.
PLANNING
Mr. Aderholt. And you mentioned a 5-year technology
investment plan?
Mr. O'Malia. I think it is incumbent upon us to give this
committee the specifics of where we need to be to live up to
the enforcement requirements that we have laid out in our
rules.
Dodd-Frank gave us a new set of rules. What is it going to
take to be that 21st-century regulator? What tools do we need
to invest in? What kind of people do we need? And what does the
budget look like? And you need to give us annual milestones,
direction for annual milestones, so you can measure our success
or failure.
Mr. Gensler. We put together a 5-year strategic plan, the
Commission, around the time of the passage of Dodd-Frank, so
that is 3 years or so ago. We are set to do another 5-year
strategic plan early throughout the rest of this year, and then
we would submit it to Congress and so forth.
Mr. Aderholt. Which he was referring to.
Mr. Gensler. Even broader, because a broad strategic plan
would include technology, but it would be broader covering all
Commission programs.
So we are where we need to update our 5-year strategic
plan, in essence, early, after about 3\1/2\ years, because now
that we have not only got the passage of Dodd-Frank, but now we
have a lot of experience. Our rules are largely done, market
participants and data and the uses of it. It is time to update
the whole strategic plan, with technology being a key
cornerstone of it.
Mr. Aderholt. So, you know, just making sure I clarify
this, when you are talking about developing a 5-year plan,
yours is more comprehensive. Are you talking mainly more
technology-specific?
Mr. O'Malia. Absolutely.
Mr. Aderholt. And, you know, let me just ask you, Chairman,
would you work with the other commissioners in trying to
develop something for technology, a 5-year plan in that regard?
Mr. Gensler. I think as it relates and it is part of the
broad strategic plan. Because I think that you can't really
decide how to put technology to work unless we have some shared
views as to what is our overall strategy of examination and
registration, enforcement, and how it fits into that strategic
plan.
But, yes, as it is part of that overall, it is our full
intention to be doing it as part of the strategic plan that--I
can't remember the exact timing, but later this year or early
to the first quarter of next year we would finalize.
Mr. Aderholt. My time has run way over.
Mr. Farr.
TECHNOLOGY FUNDING NEEDS
Mr. Farr. Well, thank you, Mr. Chairman. I want to continue
along those lines.
Our oath of office is to provide for a check and balance on
all things, private and public. It is also, I think, the
fundamental responsibility to guarantee the national security
of our country. And part of that national security is our
financial security.
And as we talk about your need to have the tools, both
personnel and technology. In many ways, you are like the staff
of this committee. Because we are like the board of directors
of the CFTC. And we really ought to be making sure that in this
modern world that you have the tools you need to do the job. I
want to understand what kind of risks are at stake if we fail
to meet your concerns.
I just wonder if your $125 million ask is enough. I mean,
ironically, you are talking about a 5-year strategic plan. You
know, the other agency that does 5-year strategic plans is
called the Department of Defense.
Mr. O'Malia, you talked about having a separate budget for
technology. I haven't looked at it that closely. Is it separate
from the $125 million increase?
Mr. O'Malia. In our request, it is wrapped up in the
overall total.
Mr. Farr. Uh-huh.
Mr. O'Malia. For the last 3 years, Congress has provided
bill language designating a specific amount, a minimum for
technology.
Mr. Farr. Well, the numbers that you are quoting are the
numbers that came out of OMB. What are the numbers? Are your
numbers different?
Mr. O'Malia. No, they are not. The number we have given--as
an independent agency, we develop our own budget and we submit
it to OMB. They have--you know better than I, Mr. Chairman--
what they do to our budget was relatively unchanged from our
recommendation. In fact, when we send our recommendation to
OMB, we send an identical copy to you so you know exactly what
we are recommending to OMB. So this budget is what we
recommended to OMB. The only difference, I think, is the
President proposed a fee structure, but not to be kicked in
until next year.
One of the things and why I continue to focus on technology
is I can't give you a good number on technology because I don't
have any planning horizon to base that on. I have no idea how
much it will cost to develop an order message system, meaning
how we are going to pull in order messages, to supplement our
transaction details. I have no idea how much it will cost to
establish a risk-analysis system for designated contract
markets or clearinghouses. I don't know how much it is going to
take to integrate swap execution facilities, and the swap
market with futures markets.
We haven't done the math. We don't have the details to
inform you and us, frankly, what our needs are going forward.
Mr. Farr. Well, this committee has never been technology-
averse. I mean, we took our Farm Service Agency, which has
field offices in every one of our districts, but when they
asked for a technology increase, we gave them everything they
needed. And we upgraded their software all over this country.
And I think Chairman Gensler last year indicated that it is
not just technology, because when you get down to these cases
that you just settled and got the fines on, judges don't want
to hear computers, they want to hear people testify. But,
obviously, the data you are using comes from technology.
But, Mr. Chairman, this is one where we can't afford not to
meet their request. There is too much at risk.
Mr. Gensler. I share your view, but I know that it is a
challenging budget environment for a committee of yours to be
faced with a commission like ours coming for a request. But,
fortunately, though it is 52 percent, we are a small agency,
and it is $100 million in the overall budget of the U.S., which
is measured in the trillions. I know that is not what you get
to allocate at this subcommittee, but I do think it is a good
investment.
Technology is just a tool----
NATIONAL AND FINANCIAL SECURITY
Mr. Farr. In this light of national security, that is where
we put more money. If it is terrorism-oriented, we will put
money toward it. But we don't think of the financial world as
also being part of our national security. And it is. I mean,
obviously, the intel agencies monitor the markets every day. It
is a big, big issue. And it seems to me you need the so-called
weapons to do your mission, as the DOD does.
Mr. Gensler. Yeah. I like your analogy. We need the weapons
or tools of technology and people to oversee these markets. I
think of it usually about economic security.
And it is so that people in each of your districts--and,
again, it is the small-business man, like my dad was, that can
just make sure that when they take out a loan, they can lock in
the interest rate, or if they are a farmer, that they can lock
in the price at harvest time. That is what these markets are
for. There are speculators in the market, but the heart of the
market, the reason this small agency exists and has existed, is
to ensure that the markets work for those people at the core of
it.
Mr. Farr. But when it was invented, we never even heard of
derivative swaps.
Mr. Gensler. Well, we never heard of so many things, and so
much has changed even in the last 5 years. And Congress gave us
a whole lot larger mission. And we will probably be grappling
with this for a number of years. I just think this agency is no
longer right-sized to the mission that we got. And whether we
catch up with that hopefully this year or whether it takes us a
number of years, it is to right-size it to the mission.
Mr. Farr. Thank you, Mr. Chairman.
Mr. Aderholt. Mr. Yoder.
RECORD KEEPING REQUIREMENTS
Mr. Yoder. Thank you, Mr. Chairman.
Gentlemen, I have been listening closely to this dialogue
we have been having about the scope of the mission, how that
has changed over the years, certainly Dodd-Frank. I think the
point has been made very clearly on that.
I want to take that conversation and maybe move it into a
thought process on some of the things and rules that are being
placed upon some of our commercial market participants and the
burdens we are placing on those folks. So these are the burdens
you are placing on others versus the burdens we are placing on
you, and maybe think about these things in similar terms.
And, Chairman Gensler, in particular, with regard to the
oral and electronic recording requirements included in part
1.35, as you know, despite significant comments from both
industry participants and others at the Commission, these
requirements may be beyond the scope of anything needed to
perform adequate market oversight, yet the Commission has
chosen to leave them in place, placing an enormous burden on
small commercial market participants, in particular, for what
some see is merely a regulatory fishing expedition.
So I would like you to speak to that. And I would also like
to know, would you agree that these requirements for some are
going to be extremely onerous and, in some cases, actually
cost-prohibitive to industry participants, and potentially have
the effect of likely having these rules force some current
members away from the exchanges?
Mr. Gensler. Oral tape recordings are very important to our
oversight of markets. They are at the core of these recent
interest rate investigations. And so, in this rule that you
mentioned, rule 1.35, we finalized in the fall and
significantly narrowed--we proposed it, again, through the
Administrative Procedures Act, we got a lot of comments in, and
significantly narrowed it, and then finalized that in the fall
so that futures commission merchants--we only have 110 or 120
futures commission merchants--as well as swap dealers--Congress
specifically put in statute that swap dealers had to do oral
recordings--do oral recordings.
I would like to follow up with you directly if there are
issues that you are hearing from specific futures commission
merchants and members of exchanges. Because our clear intent
was to get the tools of law enforcement and the tools that
these recordings be made by these major market participants,
and not--it is not a requirement on, let's say, a grain
elevator operator or a farmer or small business. But I would
like to better understand, because if you can help us be our
eyes and ears, maybe you have heard something I just haven't
heard yet.
Mr. Yoder. Sure. I appreciate that, Mr. Chairman.
Commissioner.
Mr. O'Malia. Yes, the concerns I have heard are from small
FCMs. There are two issues that have really raised their
concerns recently. One is the residual interest issue and how
they are going to be dealing with the payment of margin. And
the other one is this 1.35 rule.
And these are the smallest FCMs. Now, we have provided an
exemption for small IBs; these are the introducing brokers. But
there are some elements, there are certain participants or
agents of the FCM that go out, and they use regional offices,
they use other facilities, and they don't have recording
capabilities in these satellite offices. And those are the
individuals I have heard from most recently.
And so I think that really bears careful examination to
figure out, have we created an expectation that they can do
this without much cost? And that could have been a failure of
our own cost-benefit analysis to really thoroughly look at all
of the participants in the market. And maybe they didn't get on
our radar screen and we should go back and take care of that.
Mr. Yoder. Okay. I appreciate those answers.
LITIGATION EXPENSES
And then a final question regarding your budget, in
particular, and this discussion about technology and where we
might need to invest to make, essentially, the CFTC more
efficient. Certainly, there are some areas of the budget that
don't create efficiencies, that don't provide value, and one of
those, probably, areas is when we get into litigation. You
know, as a lawyer, certainly I understand lawyers have to put
food on the table and we have to make sure that--you know,
lawyers are people, too. But the litigation costs of CFTC
certainly are a factor that might drive away from other
priorities.
And so I thought I might just allow you to discuss ways in
which the CFTC can operate in a manner that might avoid some of
these lawsuits. Or are there ways that we can find solutions
that might get us past the very divisive 3-2 votes and points
in which we might not be in agreement and then creating this
litigation atmosphere that is costly for everyone?
Mr. Gensler. I in no way want to create any discomfort for
my friend and fellow commissioner O'Malia, but the vast
majority of our rules are actually unanimous. I think 70
percent have been finalized unanimous. But there are a handful,
a small handful, of 3-2 votes, but it is maybe only 10 percent
of what we finalize. We work and work and work at consensus; we
don't always get there. And that is the nature of five
independent-minded and thorough people.
In terms of litigation, I assume you are referencing that
we have had I think it is 3 circumstances where somebody has
brought litigation, on 48 final rules. I think it is part of
our democracy that that occurs, but it just gives you a sense
of it.
We address ourselves through the Administrative Procedures
Act, cost-benefit analysis, Paperwork Reduction Act, and so
forth, and all of the procedures. But if somebody thinks we got
it wrong, they have the right, as they should have the right,
to take that into the court system.
We address issues ourselves, trying to be a very open
process. I think we are nearing 40,000 comment letters. We put
all the comments up on our Web site. We have had over 2,000
meetings. And we put all these meetings up on our Web site so
people can see, and run as openly as we can this challenge of
getting this in place.
Mr. O'Malia. One area where I think we can do a much better
job in minimizing the legal fees and increasing the compliance
is to really draft commonsense, straightforward rules.
The swap dealer rule, unfortunately, does not meet that
test. It is a joint rule with the SEC, yet we have come up with
different solutions on what a hedge is. And that is
frustrating. I know that the end-users, specifically, are
frustrated by the facts and circumstances application of, are
they or are they not a swap dealer? We ended up using a de
minimis threshold to lower their concerns, but it is very
difficult for them to figure out where dealing activities and
commercial activities stop. That shouldn't be the case.
In fact, this is one area where I think Congress should
actually weigh in and revisit it, because the swap dealer rule
and its application is of enormous concern to the end-users. We
could be much more clear about where their activities stop, and
then they could reduce their reliance on their lawyers to
figure out what their commercial activities actually are and
are not. So I think we could do a much better job on that.
And there is a whole host of other rules. The chairman
noted, of the 42 or 43 rules we have finalized, we have also
had over 80 exemptions or clarifications. And that really takes
a lot of the staff's time, in fact, to interpret what we
actually said in the rule. It makes the industry nervous about
compliance deadlines because frequently we wait right up until
the end and they are very uncertain. And then when you look at
the entirety of the rulemaking, understanding what rules apply
to you and when, has been a very common theme among end-users,
everybody, frankly. Does it apply to me, does it not apply to
me?
If everybody knew what the compliance deadlines,
requirements, and rules were and there were better bright
lines, I think we would increase our compliance and we wouldn't
waste our time, we wouldn't waste their time.
Mr. Yoder. Appreciate those responses.
Mr. Chairman, if I might, do we know what the cost of
litigation is to the CFTC?
Mr. Gensler. You are referencing these two or three
lawsuits?
Mr. Yoder. Yes.
Mr. Gensler. We could probably get--we haven't estimated
it, but we probably could estimate it and get back to you.
Mr. Yoder. I think it would be helpful to know that,
because particularly with the Commissioner's comments regarding
when we have no action letter and all these things. And we had
a good conversation earlier about the challenges regarding a
guidance versus a rule----
Mr. Gensler. Right.
Mr. Yoder [continuing]. And the SEC and the CFTC related to
foreign relations, all these entities. That stuff creates
litigation when we don't have specifics.
Mr. Gensler. I could answer this way. Our Office of General
Counsel, which is between 50 and 55 people, ten of the people
are in what is called a litigation unit.
Mr. Yoder. Okay.
Mr. Gensler. But they also litigate appeals in our
enforcement cases.
Mr. Yoder. Thank you.
Thank you, Mr. Chairman.
Mr. Aderholt. Ms. DeLauro.
ADDITIONAL PLANNING FOR INCREASED RESOURCES NEEDED
Ms. DeLauro. Thank you, Mr. Chairman. And sorry to dash out
to the floor and back.
Mr. O'Malia, in your testimony, you admit that the
Commission's, quote, ``expanded mission cannot be accomplished
without modest increases in resources.''
Let me ask you, how large an increase would you support?
Mr. O'Malia. A similar question was asked by Mr. Farr, and
right now----
Ms. DeLauro. Okay. I am sorry.
Mr. O'Malia. No, you were out, you had other
responsibilities.
I can't give you an answer. I don't know because we haven't
done the math. We don't know what the requirements are for our
technology going forward, which is a priority for me, of
course.
I would like to know where we need to be to surveil across
markets, SWAPS and futures markets, and what is it going to
take to develop a better risk analysis to make sure that we can
surveil the London Whale and the clearinghouses. These are very
important tools that I think we need to adopt. They have a very
heavy reliance on technology. If we had a 5-year technology
budget plan with annual milestones, we would have a better
sense of what it is going to cost to build this out.
I would like to see an order intake system so we understand
how high-frequency traders are trading, what their strategies
look like----
Ms. DeLauro. Uh-huh. No, go ahead, because I have a high-
frequency question too. I have a series of questions here, and
I want to get them in in the 5 minutes.
Mr. O'Malia. So I think it would benefit the Commission if
we did our homework, developed this budget plan over 5 years,
both staff and technology, so we can tell you and we can,
frankly, reflect on it ourselves whether we are on the right
track and how much it is going to cost.
Ms. DeLauro. Uh-huh.
Well, you spoke of high-frequency traders and futures
markets; it has grown 56 percent. You are critical of the
Commission for adequately investing in technology to monitor.
How does--and I would like to ask Mr. Gensler the same
question--how can the Commission develop the technology to
monitor the market without additional resources?
Mr. Gensler. We simply can't.
Commissioner O'Malia is right when he points out that we
should oversee orders, not just transactions. I signed off on
this over a year ago, but we don't have sufficient funds to do
it.
The chairman of this committee has rightly noted that we
have transferred between technology and staff because we have
been trying to stay at least at this level of staff. So we are
making tough choices. We need more resources to oversee----
Ms. DeLauro. So, in essence, if the budget request is fully
funded, these are the kinds of activities that you would be----
Mr. Gensler. Yes.
Ms. DeLauro [continuing]. Trying to engage in in some way.
Mr. Gensler. Absolutely.
Ms. DeLauro. Also, in the testimony, ``The budget request
presents everything as a priority and provide no metrics by
which to increase the Commission's success or failure.'' Would
you address that?
Mr. Gensler. Well, see, when we did a new strategic plan
3\1/2\ years ago, we actually took the approach that we were
not going to set a bunch of standards that we could meet 100
percent, that there were going to be real standards.
Maybe we took it too seriously because our latest report to
Congress on this, under GPRA, I guess, is the law, we found
that a lot of places we don't meet--we are sometimes at 40
percent of where we need to be or only 60 percent of where we
all collectively decided to be.
We are going to do a new strategic plan and set, again,
some roadmaps and standards for the next 5 years. And I think,
actually, as commissioners, we have our first offsite in early
May to start to work on that strategic plan.
UTILITY OF SELF-REGULATION
Ms. DeLauro. Again, Mr. O'Malia, in the testimony, you
praised the new industry initiative deployed to monitor and
protect the segregation of consumer funds. The initiatives were
created by self-regulatory organizations.
Let me get the two pieces in, and then I will ask you both
to respond.
In your opinion, what role should the Commission have in
overseeing these programs?
I will just tell you, as someone who is an observer and
needs to be an informed observer because we vote in these
areas, that, you know, I always get concerned about self-
regulation. I have watched it not just here but I watch it in
food safety, I watch it in a whole variety of areas. So it
seems to me that when you are dealing with self-regulation, we
head back to where we were before the crisis.
But I want to get your response as to what role the
Commission should have in overseeing these programs and, Mr.
Gensler, your opinion on what role the Commission should have
in overseeing self-regulatory organizations.
Mr. O'Malia. Well, I think the SRO, the self-regulatory
organization designation, is somewhat of a misnomer. We have
complete and thorough oversight of the two entities I referred
to, the National Futures Association and the CME Group. Both of
those entities did step up and deliver in the aftermath of MF
Global and the Peregrine Financial.
We had a technology advisory committee meeting. We said,
this is an industry failure that needs to be solved, and you
need to solve it and you need to pay for it. And they did it.
And today they are going to be able to report that they are
going to be able to analyze the FCM balances with the custodian
bank balances for the customers. They are able to match that up
for both equities and cash and flag for themselves and us
whether there is any deviation in that number.
So, in the case of Peregrine Financial, the gentleman who
stole the money out of the bank account and defrauded the
customers, that can't happen anymore. The banks push the
information out, and the SROs compare those two balances on a
daily basis. So we have closed that loophole. And, thankfully,
the industry did it on their dime and on their time frame,
because if we had to do a rulemaking and get comment, we would
still be doing it.
Ms. DeLauro. I want to get Mr. Gensler, if I can, Mr.
Chairman, just to answer the question, what role the Commission
has in overseeing self-regulatory organizations.
Mr. Gensler. I think we have a critical role. Congress put
it right in our statute decades ago to oversee the self-
regulatory organizations. We have the National Futures
Association to oversee parts of the market and the Chicago
Mercantile Exchange.
But I don't imagine you would want us to say that we are
not going to ever go in to examine JPMorgan's swap book or
Goldman Sachs' swap book or some mid to large futures
commission merchant. I think part of the circumstance at
Peregrine was that we didn't go in enough, as well. Even though
the frontline regulator was the National Futures Association, I
think that we need to do a better job as well.
Ms. DeLauro. So you need to oversee the self-regulating.
Mr. Aderholt. Mr. Bishop.
Ms. DeLauro. Sorry. Thank you.
Mr. Aderholt. Mr. Bishop.
DISTRIBUTION OF RESOURCES
Mr. Bishop. Thank you very much.
Your fiscal year 2014 budget proposal allowed a total of
1,015 civilian full-time employees, FTEs, which is about a 47
percent increase over the level provided for in fiscal year
2012.
Can you give us some indication of how these new employees
will be distributed among the Commission's various activities?
Assuming for argument's sake if the committee were to agree to
only half of the proposed increase in the FTEs, say, 164
additional FTEs, what would be the Commission's priority in
terms of the additional resource needs? What impact would not
receiving the full FTEs have on your enforcement capabilities
and capacity?
Mr. Gensler. Just to give you a sense, I am just breaking
down the 2014 budget increase by people; I could do it by
dollars as well. But it is 21 percent enforcement, 19 percent
examination, 17 percent surveillance. So those three, I would
say--enforcement, examination, surveillance--are the three
biggest priorities.
Mr. Bishop. These are personnel areas?
Mr. Gensler. That is if you measured it in people. If it is
pure dollars, it changes a little bit because in dollars it is
surveillance, enforcement, and then the third is data
infrastructure--so the data in dollars, because so much of that
is technology--would be the top three, and then examinations
falls to fourth.
Mr. Bishop. And what would the priorities be and how would
you be impacted if you don't get further funding?
Mr. Gensler. I think it depends where this committee and
Congress came out. As you said, if we only got half of the
funding, I still think those four areas would be the
priorities. We would have to rejuggle. We would be deeply
appreciative if we did get half of our request because that has
not been what is happening the last several years. But we would
juggle between those three or four areas--data, infrastructure,
which is so much the technology area that Commissioner O'Malia
and I agree.
Mr. Bishop. You can't do your job if you can't get your
request; is that basically it?
Mr. Gensler. Well, I certainly think that is the correct
assumption if we still under continuing resolutions are flat-
lined. And, in fact, it gets worse because we won't have a
carryover balance going into 2014.
But if you are able to see your way in this difficult time
to help us out a bit, then we would focus, I think, on these
three or four key areas.
Mr. Bishop. What you are asking for, really, is to
discharge the responsibilities and obligations that Congress
has placed on you?
Mr. Gensler. Very much so. Very much so.
Mr. Bishop. If we don't give you the tools to do it, we are
inhibiting your ability to carry out our directives.
Mr. Gensler. Yes.
Mr. Bishop. Thank you, Mr. Chairman.
Mr. Aderholt. Thank you, Mr. Bishop.
GIFT CERTIFICATES
As you have heard, the bells have sounded, and we do have a
vote. I do want to briefly follow up with one question I know
that was asked last year for the record and just want to follow
up on that.
In fiscal year 2011, the Commission signed a contract
through 2014 with giftcertificates.com. You may be familiar
with that or remember that, to provide its employees with $50
gift certificates. The gift certificates would allow Commission
staff to buy various things at retailers of their choosing.
As I mentioned, this question was asked about that last
year. I just wanted to know how much money has been spent on
that contract to date and how many of these cards have been
given to employees.
Mr. Gensler. If I could, Mr. Chairman, get back to you
promptly with answers. I personally wasn't prepared to know,
and those are very detailed questions. So if I could get back
to you promptly.
Mr. Aderholt. Okay, if you could just find us--again, I
will just summarize on that--the amount of money that has been
spent on the contracts to date and then how many of the gift
cards have been given to Commission employees.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Aderholt. So, with that, thank you both for being here
and for your testimony this morning. We look forward to working
with you as we continue on with the fiscal year 2014 budget.
And the committee is adjourned.
Mr. Gensler. Thank you.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Tuesday, April 16, 2013.
BUDGET HEARING: DEPARTMENT OF AGRICULTURE
WITNESSES
HON. THOMAS VILSACK, SECRETARY, DEPARTMENT OF AGRICULTURE
JOSEPH GLAUBER, CHIEF ECONOMIST, DEPARTMENT OF AGRICULTURE
MICHAEL YOUNG, BUDGET OFFICER, DEPARTMENT OF AGRICULTURE
Introduction of Witnesses
Mr. Aderholt. The subcommittee will come to order. Today we
begin our review of USDA's fiscal 2014 budget request. I want
to welcome the Secretary of Agriculture, Tom Vilsack; the chief
economist, Dr. Joe Glauber; and Mike Young, USDA's budget
director to the subcommittee. Go, gentlemen, thank you for
being here this morning. And we look forward to your testimony.
The strength of American agriculture continues to be in our
network of domestic and international partnerships, producers
in rural communities, research scientists looking for ways to
increase production while protecting the environment, and
exporters seeking out new markets. This system allows for less
than 2 percent of our population to produce safe, wholesome and
affordable food for our Nation and much of the world.
Agricultural exports continue to be a bright spot in our
trade balance as projected for fiscal year 2013 exports are
forecast at a record $142 billion, while imports are forecast
at $112.5 billion, resulting in a $29.5 billion trade surplus.
Every Member should be aware that this subcommittee
provides the funding for the agencies--Research, Foreign Ag
Service, Animal and Plant Health Inspection Service, Food
Safety and Inspection Service, among others--that play an
important role in keeping American agriculture safe and
competitive. More importantly, we have to thank the American
taxpayers who entrust us with using their tax dollars in the
most efficient and effective way possible.
Turning to USDA's budget request, at first glance it would
appear to be straightforward. In fact, the Secretary's
testimony says that the request is approximately $109 million
below the 2013 enacted level. However if you look a little
deeper, you will see increases in every mayor area of the
Department compared to the enacted levels of fiscal year 2013
Continuing Appropriations Act. All told, there are some $1.3
billion in increases that are largely offset by a proposal to
cut $1.4 billion from agricultural programs and move them to
international development assistance programs. It is a risky
proposition to pay for increases based on a proposal that at
least 21 Senators are on record opposing, including the ag
approps subcommittee chair and ranking member, the ag
authorizing and committee chair and ranking member, and the
full committee chair on appropriations.
Secondly, the budget includes proposals to eliminate the
direct payments to farmers, modify the Conservation Reserve
Program and change the crop insurance program. While these
proposals may or may not have merit, they do have to go through
the authorizing committees.
One of the things that the authorizing committee agreed on
last year on a bicameral and bipartisan basis as they were
developing their respective versions of the farm bill was to
reduce spending on SNAP. The Senate bill had a $4 billion
reduction that passed the Democrat-controlled body, and the
House bill had a $16 billion reduction that passed the full
committee, yet your budget proposes to maintain the increase
that was provided in the Recovery Act at an additional cost of
$2.3 billion. There seems to be some disconnect with those
numbers.
Finally, we look at the presence of overall requests and
find that it is paid for with an additional $1.1 trillion in
new taxes and never balances. In a sense this whole proposal
really does fit the axiom ``dead on arrival.''
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Mr. Aderholt. Mr. Secretary, before I recognize you for
your opening statement, I would like to ask the ranking member
of the subcommittee, the distinguished gentlemen from
California Mr. Farr, for his opening remarks.
Mr. Farr. Well, thank you, distinguished chairman. Thank
you very much.
Thank you, Mr. Secretary, for being here. I am a big fan of
your administration of this agency, and I think in the process
of giving you these budgets and CRs and sequestrations, I think
your Department really got whacked, and I am sorry to see how
hard it got whacked.
I think you haven't got credit for what you are doing in
trying to focus on a strategy for rural America in developing
the rural economy, and I congratulate you for your focus on
that. I think you haven't got any credit for the leverage
efficiencies that your were able to find in the Department to
have savings. I wonder if the blueprint for stronger service is
systemwide, is governmentwide, or is that only in the
Department of USDA, because we have never heard any other
department find the kind of administrative savings that you
have been able to find just doing commonsense approach to
modern management.
I am concerned about the cuts to NRCS. I think I would also
have some concerns that we need to upgrade NRCS to use the best
management practices, much like they are doing in organic,
because there are a lot of lessons learned in organic that
traditional agriculture is following in my district, and they
are very pleased when they see organic researchers being able
to teach them how to use less herbicides, pesticides and so on.
And I think just one challenge for you, really not a
committee or budget question, is that I think as a former
Governor and mayor, you understand local government. I think
this next decade is essentially one where the Federal
Government, because of lack of increased resources, financial
resources, is going to be stuck, and we are going to be stuck
funding the old silos that have been created, you know, long
times ago. And I think this is a real opportunity to do
realignment.
In many ways I look at why doesn't the Federal Government
contract with States and local governments to provide services
when they have on-the-ground people doing the exact same thing?
We have done this in military bases by allowing cities to take
over the operations of a military base, doing all the what they
call base ops, which is, mowing the lawns and paving the
streets and things like that, and fixing things when they are
broken. So those are sort of challenges that I think, as we
look forward, you have the opportunity to do a lot of
realignment, and I hope you look at it.
I look forward to the testimony, and, Mr. Chairman, that
concludes my remarks.
Mr. Aderholt. Okay. Thank you, Mr. Farr. Just as a
remainder, if anyone has any electronic devices that ring, if
you could put those on mute or turn those off.
Mr. Secretary, let me just say that this is a busy morning
on Capitol Hill. We have three of your colleagues in the
Cabinet that are at different hearings this morning on the
appropriations process, so the Members will be going back and
forth between hearings. I plan to be here, but there will be
some Members after they ask their questions may be slipping out
to run by another subcommittee and also some coming in late. So
as you know, that is part of the protocol up here.
But, without objection, your entire testimony will be
included in the record, and I want to recognize you now for
your oral statement, and we will proceed then with the
questions. So you have the mike, Mr. Secretary.
Opening Statement
Secretary Vilsack. Mr. Chairman, thank you very much to you
and to Congressman Farr and the other members of the Committee.
We appreciate the opportunity to be here today.
I will tell you that I think all of us are here with a
slightly heavier heart as a result of the activities that took
place yesterday. I myself have completed five marathons, and I
know that at the end of that race, it is supposed to be a point
of exhaustion, but jubilation and celebration, and
unfortunately that was the not the case yesterday. But yet it
is important for us to send a message to the rest of the world
that we are going to not stop doing business, and so I
appreciate the fact that you are having this hearing today and
will do our best to do it in a professional way.
I don't envy this Committee's challenge. You obviously have
a concern, as I do, for rural America and for those who farm
and ranch our lands, and at the same time, you are obviously
confronted with some serious fiscal challenges. We provide a
budget today which we think provides balance.
Let me point out the discretionary budget authority in this
budget will put us below the 2009 levels. In fact, it will put
us roughly a billion dollars below the 2009 levels. Let me also
point out that as a result of steps that we have taken over the
course of the last 4 years, we have reduced the staff years at
USDA by nearly 5,000 fewer staff years.
Notwithstanding the fact that we have fewer people and
fewer resources, we are still seeing an increased level of
service being provided to those who live, work and raise their
families in rural America. Whether it is ag exports,
conservation, farm service loans, rural development, all of
that is at or above record levels.
So we come today with a budget that is focused on trying to
do what needs to be done to help our farmers, ranchers and
producers. This budget will provide credit to 34,000 farmers.
It will continue to expand opportunities in research. It will
provide a strong safety net, allocating nearly $9\1/2\ billion
for crop insurance and reinstating disaster assistance programs
that were allowed to lapse in 2011 which are extraordinarily
important to livestock producers in this country. It will allow
us to continue to continue to aggressively promote trade, as
the chairman indicated the importance of exports, by fully
funding our market access programs. It will support free and
transparent markets; continue our efforts to support and to
protect our crops and our animals and plants from deadly
diseases; and proposes a new program on feral swine, which is
currently causing over a billion dollars in damage each and
every year.
It will indeed modernize our research facilities, proposing
to fully pay for a new poultry disease inspection facility in
Georgia. It will simplify our conservation efforts and
streamline them, but still allow us to have a record amount of
conservation activity in the United States. It will support all
methods of production, including organic. We will note that
organic production has significantly increased over the course
of the last several years. In fact, we are now looking at a $31
billion industry and growing at a very fast pace. And we will
continue our efforts to provide technology to allow us to make
services more convenient to our producers.
This budget also commits us to a continued effort to
rebuild the rural economy, as Congressman Farr alluded. It
commits nearly a billion dollars of assistance in efforts in
helping small business development and job growth in rural
areas, with a particular focus on local and regional food
systems, clean and renewable energy, and our new bio-based
manufacturing initiative.
It commits nearly $7 billion to improving utility services,
providing cleaner water, and expanding renewable energy as well
as broadband in rural areas, the basic infrastructure that will
allow us to continue to succeed in rural areas. It will support
the finance of nearly 1,700 community facilities, hospitals,
schools, police stations, fire stations, all of which are
necessary to improve the quality of life in rural areas, and it
will provide homeownership opportunities for as many as 174,000
families.
Now, this is a budget that also understands and appreciates
the important role that our forests and private working lands
play; provides fire-suppression resources, which is not the
area of this Committee's review, but still an important aspect
of USDA's responsibilities. In addition to protecting families
from fires, it will also continue to improve our food safety
inspection system. It will support an effort to provide all
Americans in need of assistance, and particularly our children,
with adequate nutrition, proposing new dietary guideline
research for children zero to 2 years of age, and will focus a
significant effort, as I know this subcommittee is concerned,
on the integrity of all of our nutrition programs, providing
additional resources and direction in each and every one of our
nutrition programs.
Finally, we are acutely aware of the need for us to be
responsible in terms of budget and deficits, and this budget
proposes $39--roughly $38 to $39 billion in deficit reduction
in crop insurance, conservation, water projects and the food
aid program which you have alluded to.
Mr. Chairman, I look forward to responding to the questions
the subcommittee has, but, again, I don't underestimate the
difficult challenge this subcommittee has. We offer this budget
as a path forward and look forward to your work. Thank you.
Mr. Aderholt. Thank you, Mr. Secretary.
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PROPOSED POULTRY SLAUGHTER RULE
Mr. Aderholt. And certainly, as you rightly pointed out,
our thoughts and prayers go out to the victims and their
families in Boston. And those are weighing on our hearts and
minds this morning.
I want to start out this morning by talking a little bit
about the proposed rule on poultry slaughter. It was announced
January 20th, 2012, and has been over a year since they
proposed a rule to modernize the way USDA conducts poultry
slaughter inspection. Can you give us a little overview to the
committee about the status of the rule?
Secretary Vilsack. Certainly, Mr. Chairman, and thank you
for your questions.
Our poultry slaughter process has probably not been
reviewed in terms of its methods for nearly 50 to 60 years. We
have learned a lot from science as a result of research in
terms of what causes disease, food-borne illness, and we
believe it is appropriate and necessary for us to modernize our
inspection process to really focus attention and time on the
areas where we know pathogen risks are greatest.
We have proposed this rule. We received a number of
comments, as you probably know. We are in the process of
reviewing those comments. I would expect and anticipate that we
will take action to essentially publish this rule very soon,
and then obviously we will have an opportunity for people to
weigh in.
This is obviously an issue that people have great and
strong feelings about, but we estimate and believe that
somewhere between 3- and 5,000 food-borne illnesses will be
prevented by it this new system. We think it will help us
upgrade a number of inspection jobs. It will also allow the
poultry industry, I think, to continue to be profitable, and at
the same time it will allow us to save some money as well. So
we think it is an opportunity for to us have a good
conversation about an inspection system that has not been
reviewed for quite some time.
Mr. Aderholt. Seeing that the budget justification that
FSIS is saying that in implementing the rule, that they will
likely have to overcome legal challenges, negotiate with the
unions, and work with industry to arrange conversion to the new
system, I am most concerned about the legal challenge aspect of
it and wondering if could you tell us if you belive the
Department has a solid legal foundation for this proposal, and
has the OGC weighed in on it?
Secretary Vilsack. Mr. Chairman, we believe we do, and the
reason we do is because this is not a brand new concept, this
is a concept that has been working in 20 plants as a result of
litigation some time ago. From the experience in the 20 plants,
we strongly believe that there will be fewer food-borne illness
incidences as a result of this inspection process.
There have been concerns raised about worker safety, and we
have attempted to address those concerns by suggesting that
this gives us an opportunity to study that issue and to make
adjustments accordingly if indeed there are additional risks.
We are obviously not interested in, and I am sure this
Committee is not, in increasing risk to workers.
We feel we are on solid ground. We feel that there is
adequate factual and legal basis for us doing this, and it is
certainly consistent with our mission and responsibility to
maintain food safety for Americans.
INTERNATIONAL FOOD AID
Mr. Aderholt. Moving on to touch base a little bit about
the SNAP, on a number of occasions, you have talked about the
use of dollars in the SNAP program and the corresponding fiscal
stimulus of the economy through a multiplier process. In other
words, when U.S.-grown commodities are used in the maximum
possible way in this program, we generate jobs associated with
every title of occupation in rural America, and the grain
producer--from the grain producer to the person loading grain
on barges along the Nation's waterways.
I wanted you to explain a little bit to the subcommittee
why the U.S. Department of Ag would support a major overhaul of
this program, especially if fewer dollars are going back into
the farm-based commodities, and the proposal could jeopardize
American businesses and jobs.
Secretary Vilsack. Mr. Chairman, this is one of those
issues that you are confronting where you are trying to balance
a variety of needs and requirements and at the same time trying
to be fiscally responsible. The reality is that the proposal,
we believe, will result in 4 million additional people being
helped and assisted. That will provide emergency assistance in
terms of food aid more quickly than our current system. In
fact, we believe it will probably cut somewhere between 11 and
14 weeks off the amount of time it takes to get food to people
who are actually in need.
We do believe the way this is set up that 55 percent of the
food that will be sold or utilized in this program will still
come from American producers, and we will obviously evaluate
the impact and effect of that. It does provide resources to
make sure the maritime industry and those who work in the
maritime industry are provided help and assistance, about $25
million, that is set aside for that purpose.
So this is really about getting more assistance to more
people, more quickly, with fewer dollars. And we believe it
will save over the course of a 10-year period $500 million.
Mr. Aderholt. My time has expired, so let me recognize Mr.
Farr.
INTERNATIONAL FOOD AID
Mr. Farr. Thank you very much.
Mr. Secretary, I know that in the proposal there is a
proposal to move the Public Law 480 program to the Department
of State, to USAID, so to another Committee and another budget.
And although I think from a delivery-on-the-ground perspective,
it makes sense to be involved with those agencies, what I am
concerned about is that it is a transfer of authority and
money, but it doesn't guarantee that it is going to get there,
because we know, first of all, that rarely has Congress adopted
the foreign aid budget. Secondly, the budget is so full of
other responsibilities--foreign aid to other countries--that we
need assurances that it will get to the people it was intended
for. Our food aid program was signed into law by President
Eisenhower in 1954. That was post-World War II. America had
plenty of food, Europe had none. It was the idea of how do we
take our excess and ship it abroad and feed people. I think it
was started for all the right reasons. It has just become the
most expensive food in the world in the way we buy it here, the
way we handle it, and the way we deliver it.
I am not endorsing the transfer yet, until there are
assurances that the program will stay intact and will not be
raided by other foreign aid interests.
Secretary Vilsack. Congressman, the proposal basically
suggests the resources will be divided into three specific pots
of money: an international emergency assistance fund, the bulk
of which would go in that fund. There would also be a
development fund as well as an emergency fund. And I believe,
given the way this is structured, that there will be proper
oversight and accountability in terms of dollars getting to
people that need it. That is why we are confident that we will
help 4 million additional people, that it will save money, and
that it will also save time.
As all of us know, in an emergency situation time is not
just money, it's also about saving lives. And if we are taking
11 to 14 weeks to get emergency assistance to people who are in
need, that raises some serious questions about whether or not
we are doing the right thing with these dollars.
It is true that this program started in the 1950s, and it
did start at a time when America was faced with significant
surpluses, and other parts of the world had none. I think it
has changed a bit. We have found a multitude of ways in which
we use our food and feed products in this country, which is why
we are seeing a very robust agriculture economy today, and I
believe it will continue.
So I am confident that we will be able to administer this
program; when I say ``we,'' the USAID will be able to
administer this program properly, and that we will get more
help to more people more quickly, and we will save money.
Mr. Farr. Well, you can't control what Congress will do
with the money. And I would like to see more of the details but
I am still reluctant on it. And I don't think it is going to
happen--it is just the politics. I don't think it will happen
this year, but probably the discussion of moving that way will
happen eventually. But we need to make sure that the money will
get used to feed the most needy people in the world, which I
think is really important for our foreign policy and for
international security.
BLUEPRINT FOR STRONGER SERVICE
Let me ask you another question about the opportunity--what
I have been discussing at the local level. It seems to me that
NRCS, which takes a big whack in your budget, and many farmers
aren't going to be able to get the services. I think it is an
excellent program, but I think it is also a program that was
started and still does education-based prior to the adoption of
the organic standards and the organic rules, which are now in
our tenth anniversary. I mean, that is a new farming technique,
and it has been really developed through all kinds of smart,
science-based sense of how do you do farming without having to
use pesticides by using nature in herself. And I don't know
whether--from what I hear is a lot of those practices haven't
been really integrated into NRCS. And it seems to me that there
are efficiencies that you could obtain that might generate the
savings that you have done in your other leveraged efficiencies
by upgrading the NRCS educational program to really incorporate
lessons learned in the organic thing. It is just a statement.
My real question really goes to you is that you have done
these leveraged efficiencies within your Department and had
tremendous savings and never got any credit for it. Have other
Secretaries gone through the same thing? Are they under a
mandate to do it, or is this just Secretary Vilsack's own
initiative to sort of look about how we can modernize
management within the USDA?
Secretary Vilsack. We started 2 years ago to do this,
recognizing we were facing some difficult budget challenges,
and you all were facing the same challenges. And I have shared
our techniques and our process with a number of--at the
direction of the President with the Cabinet, and a number of
Cabinet members have actually asked our team, our Blueprint for
Stronger Service Team----
Mr. Farr. That blueprint is USDA's blueprint?
Secretary Vilsack. Yes, sir.
Mr. Farr. So it is not departmentwide, it is----
Secretary Vilsack. It is not governmentwide, it is
Department-wide for us.
Mr. Farr. And how much savings do you think you have been
able to generate?
Secretary Vilsack. We have been able to identify over $700
million, and that number is going to continue to climb.
Our next goal is to focus on centers of excellence and
shared service centers where we basically find out who within
USDA does the best back-room operations, and then basically in
a sense contract with those folks to be able to save money on
the back-room operations.
Mr. Aderholt. Mr. Fortenberry.
AMERICAN AGRICULTURE
Mr. Fortenberry. Thank you, Mr. Chairman, for holding this
hearing.
Mr. Secretary, welcome. Nice to see you again.
Did you watch the Super Bowl? There is no trick here.
Secretary Vilsack. I am a Steeler fan. I did not really
want to watch the Ravens win the Super Bowl.
Mr. Fortenberry. Well, I am not a big devotee to Super Bowl
commercials. A lot of them can be on the margins, as you know.
But there was one that was extraordinary, and it basically for
about a minute portrayed the ideals, the values, the risks, the
hard work, the noble cause, if you will, of using your own two
hands and growing food. And I thought it was so powerful and
impactful in helping restore, if you will, the romantic ideal
of the American agriculture. I was just deeply, deeply
impressed. Didn't even realize it was a truck commercial until
the very end.
With that said, I think both of us have a responsibility,
all of us here actually have a serious responsibility, to
continue to reexplain the importance of American agriculture to
our people, our Nation. Agriculture is not only about a safe
and abundant food supply, it is also about economic policy, one
of the few bright spots in our economy, trade policy, energy
policy, environmental policy, as well as the national security
policy.
We have had dozens of Nebraska national guardsmen go to
Afghanistan who have farm backgrounds to help that country
transition to some sort of economic stability, put their lives
on the line to help farmers over there to build up their
economy as a part of our draw-down strategy.
With that said, I know you are a robust presence throughout
the Nation on behalf of American agriculture. I have seen your
speeches, and I really appreciate that. I just wanted to
elevate the importance of all of our conversation to the
broader communities out there about how much agriculture
contributes to the Nation's well-being. Sometimes we get into
narrower policy fights up here, but lose sight of the broader
impact that our farmers and ranchers and all of our producers
have for America's well-being. So thank you for your leadership
in that regard.
One quick point. We are, in our region, suffering a severe
drought, as you know. I was on the phone with one of my
producers midwinter, and I asked him what he was doing. He said
he was moving dirt. I said, how are you doing that? He said,
well, there is no moisture in the soil, so you can break
through it pretty easily.
So it is important, I think, that we all look at and
continue to think creatively as to how we research and engage
in drought-mitigation measures, and I wanted to hear how big of
a priority that is for the Department. And I have a couple
other questions, so I will just stop here.
Secretary Vilsack. Representative, first of all, thank you
very much for your comments about the American farmer, rancher
and producer, the best in the world and very underappreciated
throughout the country.
We obviously take this issue of drought and, for that
matter, extreme weather conditions very seriously, and it is a
priority area of ours in this year and for the next 4 years as
long as I am Secretary to focus on mitigation and adaptation
strategies to allow our farmers to be the best in the world.
Let me give you a couple of examples.
We will be announcing in the next month or two a series of
initiatives focused on climate change and expanding research
opportunities. We are focused very much on multicropping and
cover cropping because we think that is a conservation
opportunity that we have not fully appreciated and have not
fully educated folks about the benefits. We are looking at
additional barriers in our crop insurance program that make it
harder for people to embrace cover crops and multicropping,
trying to remove those barriers. We are looking at ways in
which we can create market opportunities for those cover crops.
And we are doing research on the impact that certain cover
crops have on primary crops to make sure that we don't solve
one problem just to create another.
We will continue to keep a watchful eye this year.
Fortunately some of the spring rains and late winter snows have
abated the drought situation in some areas of the country, but
there are still a number of areas, including Nebraska, that are
still quite dry. So we will have the same set of tools that we
had last year available, and we will keep a wary eye on this,
and, if necessary, we will utilize additional CRP land, for
example, if it becomes an issue of forage. We will continue to
look at ways in which we can provide help to producers.
BUDGET PRIORITIES
Mr. Fortenberry. Thank you for saying that. I think it is
terribly important, given that we spent $15 billion on
indemnity payouts on crop insurance to mitigate the affects of
drought, which were important obviously. But thank you for that
commitment and those statements.
In a broader sense I would like to hear from you what--we
all have again a responsibility to continue to think
entrepreneurially about policy. What is old that needs to be
modernized or let go of; what is new that needs to be invested
in? And from, again, a higher level of perspective, how would
you answer that question?
Secretary Vilsack. Well, specifically in the area of rural
development, we are proposing a consolidation of a number of
the smaller programs into a more competitive program that will
stir the imagination and creativity of folks in rural areas to
think more creatively about rural development. We established
the Great Regions Initiative in which we are asking people to
think not just about their individual community, but how they
fit within an economic region.
We are focused very much on building the bio-based economy.
We think this is an underappreciated opportunity for innovation
and rebuilding the middle class, as the President has directed,
basically taking everything that we grow and raise and
converting it into a chemical, into a plastic, into a fiber,
into a fabric.
I have seen extraordinary things recently. I have seen
plant material that is being used to produce something that is
akin to fiberglass that will be stronger, but lighter, that
someday will be used in auto bodies to allow us to have more
fuel-efficient cars. I have seen wood that is being converted
with nanotechnology into armor that is lighter than the current
Kevlar. We have seen corn cobs producing plastic bottles for
Coca-Cola's water project, and we have seen at Ohio State
literally hog manure being used to create asphalt.
I mean, there are just unlimited opportunities here, and
investing in those opportunities and helping to focus people's
rural-development efforts is one of the strategies. I could
talk about this for a long, long time, but the chairman is
going to do what he just did.
Mr. Fortenberry. Thank you.
Mr. Aderholt. Ms. Pingree.
GIPSA RULE
Ms. Pingree. Thank you very much, Mr. Chair.
And thank you very much, Mr. Secretary. It is a pleasure to
have you here today. I am indeed fortunate to be the newest
member on this side of the committee, and I enjoyed working
with you on the Agriculture Committee, and I am glad I get to
continue to work with you over here. Thank you for your good
work.
And I appreciated your opening comments. Being from Maine,
we think of Boston as, you know, one of our hometowns and have
a lot of our own residents and citizens down there. And my kids
have run that marathon twice, so I feel very deeply for the
families and their victims, and I am glad you are keeping that
in our minds today.
I unfortunately will have to also run off to another
committee, and I have 25 questions I would like to talk to you
about this morning, but I am sure I will get in what I can
today and then hopefully have a chance to submit some or
continue the dialogue.
But one thing I wanted to bring up this morning is the
GIPSA rule. In recent years your agency has taken a lead in
highlighting some of the anticompetitive and deceptive
practices that have become commonplace in the livestock and
poultry sectors. Consolidation in these markets, as well as
vertical integration and spread of the one-sided sort of take-
it-or-leave-it production contracts has caused a lot of concern
about the impacts on farmers and their communities.
In spite of the very clear directions from Congress in the
2008 farm bill requiring USDA to address some of the most
abusive practices in these sectors, the last two agriculture
appropriations bills included policy riders. As you know, they
hamper your ability to write regulations to address those
concerns.
In the GIPSA rider included in the 2012 agriculture approps
bill, Congress put a stop to some of the regulations that USDA
had proposed, but gave a green light for you to finalize other
regulations, which was helpful, particularly those addressing
abuses in the poultry sector. Even as modest as those were,
Congress again reversed course in the 2013 continuing
resolution which we just passed and included another rider that
actually forces you to rescind some of the grower protections
that we had green-lighted in the 2012 bill. This rider in the
CR was strongly opposed by farmers groups across the board,
from the American Farm Bureau Federation to the National
Farmers Union.
I personally, as you can tell, don't believe these riders
were a good idea, I think they should be corrected, and I would
just like to hear you talk a little about why those poultry-
grower protections are so important and these riders aren't
helpful to our farmers.
Secretary Vilsack. Well, Representative, I had the
opportunity to speak to a number of producers who had been
dealing with Pilgrim's Pride in the Carolinas, and who, as a
result of the bankruptcy of that particular company, suffered
significant harm. They expressed concerns about the way in
which they were treated, the lack of notice, the lack of
ability to adjust their operations.
In the poultry areas in particular for growers, they are
required to invest a substantial amount of money to build these
poultry facilities only to find the contracts on which those
poultry facilities are based pulled out from under them with
very little or short notice. And that is the reason why we put
these rules in place, to give those farmers an opportunity to
have a more level playing field in negotiation. We also felt
that they were being taken advantage of as a result of
arbitration, they had very little say in the arbitration
process, and the result was we put together a series of rules
designed to level the playing field.
You know, the reality is that this is a very difficult and
challenging market for small producers. It is one of the
reasons why we are focused on creating, as you well know, and
as you are a great champion for, local and regional food
systems as we create additional market opportunities for the
smaller producers. But without some protection, they are really
at the mercy of companies, and it makes it very, very difficult
for producers to be able to go into the bank to secure the
financing to allow them to continue their operation and to
expand it.
KNOW YOUR FARMER, KNOW YOUR FOOD
Ms. Pingree. Well, thank you for that. I appreciate your
continuing support for the farmers in this situation.
Let me see if I can sneak in one more question while I have
a chance. So I, like many of my colleagues, was sad to see that
Kathleen Merrigan was going to be leaving the Department, and I
really just want you to know how much I appreciated the work
that she did on public advocacy around local food, and organic
agriculture and many of the issues which, as you know, have
been my top priority around agriculture.
And I just want to get you to speak briefly about, given
that she will be gone, the commitment that your Department will
have to things like the local food systems; the fact that you
mentioned earlier, the growing market in organic foods, local
foods, and farmers markets. I think that the local food
initiative that you have done and the Web site and all those
things have been really beneficial to many of the small farmers
in my area finding huge new markets that they can connect with
the consumers. So I don't have a lot of time, but just love to
hear how you see that continuing. I am sure you will be
appointing great people, but seems like an important
consideration.
Secretary Vilsack. Let me assure you that it is a priority
of mine. The local and regional food system is an important
component of rebuilding the rural economy, and it will
continue. The Deputy did an amazing job of putting together a
committee of our Know Your Farmer Know Your Food effort to
basically allow all aspects of USDA to be engaged in this
effort. That will continue and strengthen, and we hope to
institutionalize that process throughout the next 4 years.
You are correct. There has been a 175 percent increase in
farmers markets. There has been an extraordinary increase in
investment in food hubs, which allows us to aggregate that
locally produced food, and we are creating additional markets,
and it is providing an entrepreneurial opportunity that we want
to encourage. It is, I think, hopefully bringing younger people
into the farming sector, and it is also providing an
opportunity for returning veterans who are interested in
farming, but who may not have a family member who owns a farm
to get started.
So this is extraordinarily important, and rest assured,
notwithstanding Dr. Merrigan's leaving the Department, we will
continue to follow through with her vision and your vision and
my vision of this local and regional food system.
Ms. Pingree. Thank you very much.
Mr. Aderholt. Mr. Yoder.
AMERICAN AGRICULTURE
Mr. Yoder. Thank you very much, Mr. Chairman.
Mr. Secretary, thanks for joining us today. I appreciate
the opportunity to have a dialogue with you about the future of
agriculture in our country, about your budget, and how we can
work together to continue to provide a strong rural way of life
in this country.
I am concerned about the economic future of agriculture, as
many of my colleagues are. I think Mr. Fortenberry and you had
a nice dialogue about the value of promoting the family farm
and how it is really central to our values in this country to
have a strong agricultural production and small family farms.
It is a structural strength, I guess, that makes some of our
values in this country work.
And so I grew up on a farm. I grew up in a time in the
1980s, was very worried about our farm going bankrupt. A lot of
our neighbors went under, and it was a scary time in a lot of
regards. My father came up in 2011 to see me sworn into
Congress. It was the first time he had been in Washington,
D.C., since 1978, when he drove his tractor and parked on the
Mall and caused all sorts of havoc, along with a lot of other
farmers, because, you know, farmers get very passionate about
what they are doing, and so, you know, there is a strong
history there.
In sort of reviewing your budget, and looking at the future
of an ag bill in this Congress, and figuring out where we are
going to place our priorities, some of the savings are coming
from reducing aid to farmers, support in different programs.
And I would like to hear your thoughts about the long-term
perspective, the types of policies we could support to ensure
that we have investment. We have young people getting engaged
in farming, that they feel like there is an economic viability
there.
We have a tendency to operate in the here and now when it
comes to agriculture, so things are pretty good in the world of
agriculture right now. So we are in the process of saying, let
us cut A, let us cut direct payments, let us cut crop
insurance, let us whatever folks are suggesting in this
Capitol, because it is pretty strong right now in the world of
agriculture. Some concerns are maybe an ag bubble out there.
And so I would like your thoughts on how we work together
to pursue policies that can ensure that we can have a strong
push towards agriculture policy in this country, that we can
ensure investment, and we can ensure young people continue to
be engaged, and not just deal in maybe the moment in terms of
ag policy, but think long term, and think where we have been
all the way dating back to 1978 and beyond into the future.
Secretary Vilsack. You know, Congressman, that is an
excellent observation and an excellent question. We do have a
tendency here to think in 1- or 5-year increments, and the
reality is I think we have to have a longer-term vision in
agriculture.
I would say a couple of things, one of which is not
necessarily a focus of this budget, but I think is
extraordinarily important in a topic of conversation today, and
that is immigration reform. If we really, truly want to support
agriculture, then we have to make sure there is an adequate
amount of workforce there available to pick what needs to be
harvested and to work on the farms and the very operations that
need workers.
Secondly, I think we have to be very concerned about the
impact of extreme weather conditions on the ability to grow and
raise what we have become comfortable growing and raising in
certain parts of the country. That is why I think it is
important for us to invest and significantly increase our
investment in agricultural research. The reality is that ag
research has been flat-lined for far too long when we have
invested in a lot of other research areas significantly and
aggressively. I think we need to play some catch-up there.
I think we do continue to need to have a strong safety net.
Having said that, I don't think it necessarily means that you
can't change aspects of the safety net. And I think we have to
be very concerned about credit. You know, we are going to help
34,000 farmers access credit, but that doesn't mean that there
isn't a backlog of unmet and unfilled credit needs out there.
And so we need to work with our commercial lending institutions
to make sure that they feel comfortable with providing credit
to farmers.
And then finally a big issue that I think we all have to
address is this issue of who is going to farm. The reality
today is that the average age of a farmer, I think, when the
census is completed is probably going to be close to 60 years
of age. And we have significantly more people farming who are
over the age of 65 and 75 than we do under the age of 35. We
have got a million or so returning veterans. I think this is an
enormous opportunity for us to link a need for beginning
farmers with--as Representative Fortenberry suggested, a lot of
these kids who were serving in the military came from those
small towns; 40 percent of the military is from rural America.
So it is an opportunity for us to reconnect those young people.
IRRIGATION CROP INSURANCE PILOT PROGRAM
Mr. Yoder. We covered a lot of ground. A specific one
regarding the conversation with Mr. Fortenberry regarding a
drought, and particularly into irrigation. I want to ask about
the irrigation crop insurance program, and whether that is
something that the Department of AG, RMA would have an answer
on whether that can be a policy that we can move forward on the
idea of a program where we would have farmers plant lower
population, less irrigation, expect a lower yield, whether that
would be supported by the USDA?
Secretary Vilsack. Well, we have a pilot program, as you
know, operating in that area, and I think the reason you have a
pilot is to basically study the mechanics and the economics of
this.
RMA is always looking for ways in which we can provide help
and assistance. We have expanded the number of crop insurance
programs in the last 10, 15 years from 98 to 132. The number of
acres has increased by 100 million. So we are always looking
for ways in which we can expand significantly this risk
management tool. I think you are going to continue to see that
aggressive effort.
Mr. Yoder. Thank you.
Mr. Aderholt. Mr. Bishop.
SOUTHEAST POULTRY RESEARCH LABORATORY
Mr. Bishop. Thank you very much, and welcome again, Mr.
Secretary. And I appreciate your remarks. I think you expressed
the sentiments of all of us with regard to the casualties and
the situation in Boston.
Mr. Secretary, I would like to take a point of personal
privilege and commend you and the Department on your decision
to invest $155 million in the new Agriculture Research Service
poultry laboratory in Athens, Georgia, which I understand is
the Department's number one priority for the agency this year.
As you know, the State of Georgia is the number 1 producer of
poultry products in the Nation; $18.4 billion to the State's
economy generating 100,000 jobs, 54 of the States's
agricultural economy, and we have 105 counties out of our 159
counties that are producing over $1 million at the farm level.
So as a cochairman, along with Representative Crawford of
Arkansas, of the Congressional Chicken Caucus, I just want to
applaud the Department's decision in that regard.
PEANUT RESEARCH
With that said, I would be remiss if I didn't also point
out my disappointment with the ARS proposals to reduce funding
for two existing projects at the National Peanut Laboratory in
Dawson, Georgia, and to reprogram the funds through other
peanut laboratory activities, specifically the $899,000
reduction in the research efforts that is aimed at sustaining
peanut cropping system competitiveness, and the $730,000
reduction in the research project aimed at developing irrigated
and nonirrigated peanut-management technologies.
The work that the National Peanut Lab has done over the
last decade has just been tremendous in helping the peanut
industry remain competitive in the global marketplace by
helping to decrease the irrigation costs, more efficiency in
irrigation, the metrics of metering to monitor the amount of
water that is actually used, and it has really contributed
immensely to the bottom line for peanut farmers. So I am very,
very disappointed with that, particularly when some of our
farmers, particularly the new and small farmers that are trying
to expand, many of whom have been dry land farmers and are
trying to now become irrigated--the techniques that are
developed in irrigation through this research at the National
Peanut Lab really make it much more affordable for new small
and disadvantaged farmers to convert from dry land to
irrigated. And so I just wanted to express that and ask you to
give some thoughts on that.
Secretary Vilsack. Congressman, thank you for your comments
about the poultry facility. Not only is Georgia a major
producer of poultry, but the reality is the United States of
America is the number one poultry producer, and the fact is
that we have got antiquated facilities that will probably not
set and cannot meet the challenges that that industry has from
a disease standpoint. So we hope that the Congress will take
into consideration our request and to note that we are not
asking for a small amount of money to get something started,
that we have actually figured out how to actually pay for it in
1 year.
As it relates to the concerns that you expressed about the
peanut research, we have done a rather extensive effort at
reviewing all of our research facilities and all the research
that is going on in the research facilities, knowing full well
that over time we are going to be faced with tight budgets. And
we have come up with a capital improvement plan basically that
is attempting to marry the best-suited facilities in terms of
capacity with the most important research, and basically make
sure that we are doing this in the most efficient way. And the
facilities that may be not as well equipped to do research or
research that is not as high priority, we obviously have to,
with limited resources, make choices. These are not easy
choices, and this particular case, I suspect it is probably
about the age of the facility and the ability of the facility
to actually do the research. It is important. I suspect it is
not because we want to discontinue the research. But I will
certainly double-check that and make sure that we get you
accurate information as it relates to those particular labs.
[The information follows:]
National Peanut Laboratory in Dawson, Georgia
The fiscal year 2014 budget request has proposed no change in the
overall funding level for the Peanut Research Laboratory at Dawson,
Georgia. The Agricultural Research Service (ARS) proposes to redirect
to focus of some research within the Peanut Research Laboratory at
Dawson, Georgia to supplement higher priority peanut research needs. A
portion of the funding will be redirected for work on research related
to peanut cropping systems. This research will look for ways to sustain
peanut agricultural production capacity over long periods. The
remaining funding will be redirected to focus on peanut water
management research.
PECAN PRODUCTION ESTIMATES
Mr. Bishop. Thank you, Mr. Secretary.
Very quickly let me point out also on another issue that
one of the casualties of sequestration was the National
Agricultural Statistical Service's plan to suspend pecan
production estimates and the forecast, which is effective
immediately. The entire industry relies very heavily on these
reports as well as a monthly cold storage report, which we
understand will continue.
Unlike other U.S. tree nut crops, pecans are growing across
a wide swath of 15 States, and, as such, the industry is
segmented and has not been successful in establishing a
marketing order. Therefore, the pecan industry has very limited
means to determine the size of the crop in any given year.
The numbers that NASS provides are critical to the pecan
industry's ability to operate in what is a very volatile
marketplace. Can you ask your staff or can you review other
options whereby the reports might be reinstated, because they
are so critical to the pecan industry in the United States.
Secretary Vilsack. Congressman, we respect the request, but
I would point out that in addition to sequester, Congress also
added an additional 2.7 percent cut to this budget, so we had
to face a 7.5 percent cut to the budget. We had 6 months, in
essence, to essentially absorb that cut. That is, in essence, a
15 percent cut of the remaining resources that we have
available.
We are not going to be able to do this without making some
very difficult decisions. We try to make decisions based on the
most important data to the market out there. We will be happy
to review that, but I don't want to hold out undue hope that
there are many options, because there aren't.
Mr. Aderholt. Mr. Rooney.
Mr. Bishop. I thank you, Mr. Secretary.
Mr. Aderholt. Mr. Rooney.
CITRUS GREENING
Mr. Rooney. Thank you, Mr. Chairman.
And, Mr. Secretary, I appreciate your allegiance to the
black and gold. I guess the one good thing about the Ravens
winning is that the 49ers didn't get their sixth Super Bowl, so
we are still number one.
My district in South Central Florida is one of the largest
citrus-producing districts in the country. From Orlando to the
Keys and Vero Beach to Tampa, we have seen an explosion in
citrus greening to the tune of over 6,000 jobs and $3 billion
in revenue lost.
The good news is that the growers I talk to when I am in
the district believe that because of USDA efforts and the
research that we have been able to do, they do see a light at
the end of the tunnel. They do believe that we can defeat
citrus greening, but it is going to take a commitment, it is
going to take a lot of work that I know that you are committed
to.
Besides tourism, agriculture is the number two industry in
Florida. Could you elaborate on the changes the President's
budget makes to the pest management and crop protection
activities when it comes to citrus? Specifically, how will
these changes impact invasive pest and disease research as it
relates to the citrus industry?
Secretary Vilsack. Well, Congressman, we certainly
appreciate the challenge that the industry faces with citrus
greening. It is a devastating disease, and it is economically
devastating. That is one of the reasons why we created a
special program in Florida with an appropriation of roughly $9
million dedicated simply and completely to citrus greening.
The good news is that we think we have found a way in which
we can deal with the vector of this disease. It doesn't cure
the disease, but it potentially can significantly reduce the
spreading of it. We are going to continue this research, we
understand it is important, and we understand the significance
of it.
There are areas throughout our budget where we essentially,
you know, prioritize what you can fund, and when you basically
run out of money, there are things below the line that you
cannot fund. Citrus greening is not one of those things, that
is a priority for us, but there are other areas that will be
impacted. There may be circumstances where eradication was the
strategy, and eradication may not actually work, and so we may
have to go to a mitigation strategy, which is less expensive.
There may be circumstances where conceivably and potentially
cooperators at the State and local level may be asked to assume
a bit more responsibility because of the difficulties of our
budget. But in this particular area we are still focused and
will continue to be focused.
Mr. Rooney. Thank you. Thank you, Mr. Secretary.
I yield back, Mr. Chairman.
Mr. Aderholt. Mr. Valadao.
BIOTECHNOLOGY
Mr. Valadao. Thank you, Mr. Chairman.
Thank you, Mr. Secretary.
Biotechnology provides farmers with new tools to manage
weeds, insects and especially drought. As the need for
herbicides with multiple modes of action to combat the issue of
wheat resistance grows, what is the USDA doing to accelerate
the approval of biotechnology traits that not only enable
solutions to this issue, but also preserve the ability to
utilize soil-conserving practices like conservation tillage?
Secretary Vilsack. As part of our Blueprint for Stronger
Service, we initially instructed all of our agencies to engage
in process improvement, to embrace Six Sigma, to establish
folks within each agency and Department that were well versed
in Six Sigma practices. One of the first projects that we
embraced with this new effort was in the area of biotechnology
regulatory approvals. When we began the process, I think it
took over 900 days to secure approvals. Today we have
substantially reduced that. I think the goal is to get it below
a year. So you can see that we are significantly reducing the
amount of time.
The second thing we have done is to understand that it is
not just enough for us to approve and accelerate our regulatory
approval process, we also have to get our friends and neighbors
in the international community to do the same. So we are
working with China on a pilot project to basically dovetail our
regulatory processes with theirs and synchronize them so that
we can shorten the time to get new technologies in the
international area, specifically in China, a year or two sooner
than otherwise.
Mr. Valadao. I don't know if I have enough time. I don't
see where the clock is at.
Mr. Aderholt. Go ahead.
NATIONAL ANIMAL HEALTH LABORATORY NETWORK
Mr. Valadao. I have got enough time for another question?
Regarding the NIFA budget and the NAHLN budget, which
includes a number of State laboratories, the herd veterinarian
I happen to use personally in California uses the Taleo
laboratory near my district to help diagnose problems in my own
dairy herd. The UC Davis Animal Health and Food Safety
Laboratory performed the initial identification of the 2012
case of BSE in the cow in California that was then confirmed by
the national laboratory in Ames, Iowa.
The partnership and expertise of USDA and the State
laboratory network in this instance illustrated the importance
of this coordinated system in disease surveillance and in
getting accurate, timely information to the public. I am
concerned that without a long-term funding plan for the overall
network and how it supports the State laboratories, we will see
a decline in the important infrastructure necessary for the
timely identification of animal diseases and food safety risks.
Mr. Valadao. What is the role of the State laboratories in
connection with the National Animal Health Laboratory Network,
and do you know how many states participate in the network?
Secretary Vilsack. Congressman, I do not know the number,
specific number. We will be happy to get that to you.
Obviously, this issue of disease detection and determination is
something that does require cooperative efforts. It is one of
the reasons why we want to strengthen our overall lab system.
It is one of the reasons why we are proposing a new lab on the
poultry side, and it is one of the reasons why we engage in
this rather extensive review of our capital resources.
We are obviously going to continue to work with States, and
in fact our relationship will likely get stronger. Because of
the fiscal challenges we face, we will have to have a stronger
partnership with States because they may be asked at some point
in time to assume--to do a little bit more than they have in
the past.
So we will continue cooperative arrangements, we will
continue partnerships, and we are going to look for
opportunities to leverage our resources. Throughout this budget
there are a number of examples where we are going to try to
figure out new strategies to stretch our dollars and to
leverage our dollars because we understand the work is not
being reduced, it is expanding.
[The information follows:]
National Animal Health Laboratory Network
The National Animal Health Laboratory Network (NAHLN) is a national
network of non-Federal public animal diagnostic laboratories under the
leadership of two USDA agencies--the National Institute of Food and
Agriculture and the Animal and Plant Health Inspection Service--and the
American Association of Veterinary Laboratory Diagnosticians. The NAHLN
consists of 54 State and university laboratories, located across 39
States as well as two laboratories from the National Veterinary
Services Laboratories.
NAHLN is part of a national strategy to coordinate the Nation's
Federal, State and university laboratory resources. These laboratories
provide accessible, timely, accurate, and consistent animal disease
laboratory services nationwide; provide laboratory data to meet
epidemiological and disease reporting needs; respond to foreign animal
disease outbreaks and other adverse animal health events of significant
consequence; and focus on diseases of livestock.
Animal disease-detection criteria have been developed for the
following high-consequence diseases: Foot-and-Mouth Disease, Exotic
Newcastle Disease, Classical Swine Fever (or hog cholera), High
Pathogen Avian Influenza, Low Pathogen Avian Influenza, Bovine
Spongiform Encephalopathy, Scrapie, Chronic Wasting Disease, Rift
Valley Fever, African Swine Fever, Swine Influenza Virus and Swine
Pseudorabies Virus. Swine Pseudorabies Virus was added in Fiscal Year
2012.
Mr. Valadao. Thank you.
Mr. Aderholt. Ms. DeLauro.
TRANS-PACIFIC PARTNERSHIP AGREEMENT
Ms. DeLauro. Thank you, Mr. Chairman. My apologies for
dashing around. We have the Secretary of Labor next door, so we
are going back and forth. But welcome.
Secretary, before I begin questions, let me just say thank
you for the work that you did in extending the claims period
for women and Hispanic farmers and for the recent trip you made
up to Connecticut. And I was also very pleased that the
administration requested an extension of the temporary increase
in the SNAP program that I and others worked so hard for in the
Recovery Act.
I understand that I missed an earlier exchange on the
Department's poultry inspection proposal, and curious at the
fact that 2 of the 20, 10 percent of the plants in the pilot
failed the latest round of salmonella testing, and that was
overlooked.
But my question. The resolution of trade disputes is
critical to industry, but the integrity of those standards is
imperative to consumers. There are reports that the
administration is considering a TPP, a Trans-Pacific
Partnership Agreement, a provision that would require a, quote,
binding dispute resolution for SPS standards. This presents a
real threat to the substance of our food safety standards,
ranging from the inspection process to specific microbacterial
standards, like our zero tolerance for some of the most
dangerous pathogens, plus it will result in a significant
resource strain as agency staff are diverted away from primary
public health mission of preventing food-borne illness.
My question is, why is the administration considering such
binding resolutions rather than nonbinding technical
consultations? The consultations could be helpful in the timely
review of the science without resulting in a binding decision
that in my view puts our food safety at risk.
Secretary Vilsack. Well, Congresswoman, I think the reason
is because we confront significantly greater numbers of
circumstances where countries establish nonscientific,
nonrules-based criteria and barriers to our products and make
it harder for us to get products that are healthy, to get
products that are sound, to get products that are not posing a
risk into countries. And you have to have a process by which
those decisions can be determined more quickly than the current
system.
I will give you an example. Russia currently today is
essentially preventing any import of American meat products
because we use Ractopamine. The international community has
sanctioned Ractopamine. There is no scientific basis for
concluding that it creates risk or hazard, but yet Russia is
basically establishing a no-Ractopamine, zero-tolerance policy,
which is not based on the science. It takes a long time through
the current process to get a determination or some kind of
decision that will break down those barriers.
This is not designed to create a circumstance where we are
going to let unsafe food in this country. That is not going to
happen. That is certainly not going to happen while I am the
Secretary. That is not the intent. The intent is to create a
process by which we can have some decisions made quickly when
other countries create nonscientific, nonrules-based decisions
that block our products.
Ms. DeLauro. I understand that, Mr. Secretary, and I have
full faith and confidence in you, and I know your views, but
quite frankly, in the interest of shortchanging a science
process to move in the direction of a binding resolution, which
then, you know, what happens with regard to food safety and
with public health? I mean, that is always, as you know, we
have had this conversation before, that in the interest of
trade there is a wink and a nod--not a wink and a nod, that is
unfair--but there is this sense that that takes precedence over
the opportunity to work to speed up a process on science--and
sometimes it is not quickly done--that would ensure public
health and food safety.
And I do not believe that those trade implications ought to
take precedence over the safety of the food and the public
health here. And I do not understand why we are moving in this
direction. And my concern overall about this trade agreement is
what direction we are going with regard to food safety. And I
think we have to be very, very careful of what the decisions
are before we do that, and I do not know how the consumers'
best interests are being represented in these negotiations.
CROP INSURANCE REFORM
If I have time for another question, I would like to just
ask that I was pleased that the administration's budget request
included reforms in the crop insurance program. Let me just ask
you, do you expect these reforms to reduce producer enrollment
in the program or companies that offer crop insurance policies?
Secretary Vilsack. No, we do not. The evaluation that we
have done is that essentially the insurance--part of the
reforms we proposed is basically reducing the return on
investment to insurance companies consistent with a study that
shows a 12 percent return will be sufficient to adequately
support the program. Right now the return on investment is
roughly 14 percent. In terms of the producers, we are talking
about a situation where currently the government is subsidizing
more than 50 percent of the premium.
Ms. DeLauro. It is over 60 percent, as I understand it, Mr.
Secretary.
Secretary Vilsack. But there were several aspects of this.
More than 50 percent covers them all, and we do not think that
that is necessarily going to reduce the amount of people who
buy crop insurance or the number of companies that sell it.
Ms. DeLauro. Okay.
Mr. Aderholt. Thank you.
Recognize the gentleman from Mississippi, Mr. Nunnelee.
SCHOOL LUNCH STANDARDS
Mr. Nunnelee. Thank you, Mr. Chairman.
I was encouraged when I heard reports last week that USDA
in Nashville indicated that we plan to get away from the
maximum amounts on school lunches for meats, grains, poultry.
And I was just wondering if you can give me a timetable on when
USDA is going to be moving on that.
Secretary Vilsack. That is already the case. We basically
provided flexibility within the guidelines for schools to
essentially create, in response to the concerns that were
expressed, greater flexibility. It was an effort this year
which we likely will make permanent for upcoming years.
Mr. Nunnelee. All right. So my schools are no longer
limited. If they want to serve a baked chicken breast on Monday
morning, that does not restrict their ability to serve
nutritious proteins the rest of the week?
Secretary Vilsack. No. It is an effort to try to give them
flexibility within the overall guidelines in terms of calories
and the efforts that we are undertaking to improve the quality
of the meals in terms of lower fat content, lower sodium, and
lower sugar. But they still have flexibility within those
guidelines.
SNAP PARTICIPATION LEVELS
Mr. Nunnelee. Okay. Thank you on that.
A couple of weeks ago we had Administrator Rowe in front of
this committee, and I expressed my concern about the growth in
the Food Stamp Program. It has almost doubled in the last 5
years. Projections are it looks like it is going to double in
the next 5. It is growing at a rate we cannot continue to
afford. And I was shocked at her response when I asked her what
can we do to turn that growth around, and she said, her
response was there is nothing. It is going to grow as it grows.
She said as the unemployment number goes up, the costs are
going to go up.
Well, we have had declining unemployment numbers. The
economy is showing signs of recovery. Yet number of people on
food stamps has grown over the last several years. So I will
ask you the question, what can we do?
Secretary Vilsack. Well, the projection in this budget is
that those numbers will start to go down as a result of the
improving economy, but let me specifically answer your
question. I think there is an enormous opportunity here for us
that we have not taken full advantage of. We know who folks are
who are receiving SNAP, and we know those who are working and
those who are capable of working, and I think what we ought to
be doing is a better job of using our employment and training
dollars to create better opportunities for those on SNAP to
move out of qualifying for the program or to move out of
needing as much of the program as they currently need by having
better employment opportunities.
I think that there are a number of States that do a pretty
good job of this, but there are a number of States that do not,
and I think if we focused and targeted our efforts, as we are
proposing to do in five States to learn best practices, if we
basically study, as we are going to study this fall, the
characteristics of these folks so that we know how to move them
more effectively from needing SNAP to a life of work and self-
sufficiency, I think we could reduce these numbers in a
significant way and therefore reduce the cost of the program.
The concern that I have with some other proposals is that
you are going to cast a wide net, you are going to get some
people that may not qualify for the program, but you are going
to get a whole lot of people that actually do qualify for the
program, and that is not really fair to them. But focusing on
employment and training and doing a better job I think is the
most effective way to really reduce the number.
SNAP CATEGORICAL ELIGIBILITY
Mr. Nunnelee. What about the issue of categorical
eligibility, where I get phone calls when we have lottery
winners that are on food stamps? As we deal with the farm bill,
can we deal with that?
Secretary Vilsack. After the Michigan situation, we now
have a rule that basically says that lottery winners cannot
qualify for SNAP.
As it relates to categorical eligibility, you know, I think
you have to be careful because it is an efficiency for States
that are administering these programs. States are dealing with
tight budgets. And you get rid of that, you are going to create
some administrative costs associated with it.
Our data suggests that there are not as many people who are
getting into the system as a result of categorical eligibility
that would not otherwise already be in the system or qualify.
So we are not sure that you are going to trade one efficiency
for more inefficiency, and again, you are going to get people
that may qualify for the program that are not going to get into
the program.
INTERNATIONAL FOOD AID
Mr. Nunnelee. Thank you, Mr. Chairman.
Mr. Aderholt. Mr. Secretary, I want to go back to the Food
for Peace Program that we had talked a little bit earlier. I
think there is some confusion as to what the minimal
requirement is for the purchase of U.S. Commodities. Your
testimony, as you mentioned earlier and was highlighted, states
that 55 percent of the funds will be used for the purchase and
transport. USAID is saying that 55 percent is for purchase,
transport, and related cost. How much does USDA believe will be
the minimum percentage for just commodities?
Secretary Vilsack. Well, Mr. Chairman, you know, I think it
is hard to distinguish that, but my understanding of what we
were trying to do was to reassure producers that this was not
going to be a wholesale withdrawal from the market as a result
of the transfer of this responsibility. I do not know that we
have a specific figure, but the goal here is to ensure that 55
percent is helping to support American agriculture, and that is
my understanding of what we are doing
SCHOOL LUNCH STANDARDS
Mr. Aderholt. I want to dig a little deeper in the issue
that Mr. Nunnelee had mentioned about the National School Lunch
Program and Breakfast Program. The school food service
directors from across the country have met with many of us and
talked with many in Congress concerning the issues and concerns
they are dealing with on a daily basis to implement the
regulations from the Healthy, Hunger-Free Kids Act. It actually
seems that a perfect storm has been put into motion for schools
with the implementation of the final rule for the nutrition
standards in the National School Lunch and School Breakfast
Programs.
As you know, the rule establishes new requirements for
schools to increase the availability of fruits, vegetables, and
whole grains while meeting the nutritional needs of
schoolchildren within their calorie requirement. According to
USDA's own numbers, the average daily participation in the
lunch program is down from the same time last year,
particularly in the paid meal categories. Reduced
participation, when combined with rising input cost and
increased cost to implement the changes in the new regulation,
has many schools operating in the red.
Again, it seems to be a perfect storm has been put into
motion for the schools with the implementation of this final
rule. This rule establishes new requirements for schools to
increase the availability of fruits, vegetables, and whole
grains while meeting nutritional needs of the schoolchildren
with their calorie requirement. The final rule established
weekly maximum amounts for serving grains and proteins, which
proved far more difficult for schools to meet.
In response to the feedback from schools, as you mentioned,
the Department expanded flexibility in meeting the weekly
maximums for grains and proteins for the current school year,
as well as the 2013-2014 school year.
My question would be is, how are some other ways can we
work with you in providing school flexibility in implementing
these new standards?
Secretary Vilsack. Well, I think it is important to point
out, if it is an economic issue, that schools, if they comply
with these regulations, are entitled to additional
reimbursement of 6 cents a meal, and perhaps some schools are
not taking full advantage of that reimbursement. That would be
one suggestion of making sure that people understand that there
is an additional reimbursement there for complying.
Secondly, you know, I think we have--we, USDA, have to do a
better job of educating people about the cost of all of this
because there are ways in which fruits and vegetables can be
purchased less expensively. And I think, you know, sometimes we
have a tendency to think that fruits and vegetables are more
expensive because of the way in which we calculate value.
Traditionally, we have done it based on a hundred calorie
serving. A hundred calories of potato chips, a hundred calories
of broccoli, you know, a hundred calories of broccoli would
fill this table, a hundred calories of potato chips is like
maybe a handful.
That is probably not the right way to do this. The right
way to do it is, what is a portion size of broccoli versus a
portion size of potato chips? And if you actually do that, you
are going to find that fruits and vegetables are not as
expensive as you think.
So I think part of it is education, part of it is creating
flexibility, part of it is getting feedback from folks, and
part of it is understanding what is at stake here, that a third
of our kids are obese or at risk of being obese. We have got
fewer and fewer kids that qualify for military service and that
is why admirals and generals are concerned about this
particular program and making sure that it stays firm. There
are healthcare costs associated with it there are educational
achievement results associated with it. So I think we have to
be patient with this and listen and try to be flexible, which
is what we have done this year
The other thing I would say, and the last thing I would
say, Mr. Chairman, is that this issue of calories is a little
bit--it is interesting because the calorie difference between
last year and this year is not all that great, so it is not as
if, you know, several hundred calories fewer in the meals today
than last year. I think the difference is somewhere in the
neighborhood of 25 to 30 calories, and I am not sure that 25 to
30 calories is, you know, at the end of the day, is as
significant as some people would suggest.
Mr. Aderholt. Mr. Farr.
ARS RESEARCH FACILITIES
Mr. Farr. Thank you, Mr. Chairman.
I want to drill down on ARS and the facilities. I really
appreciate your comments about needing to invest in research. I
think Mr. Valadao from California, first time we have had
another member from California, and I realize that what made
our State take the lead in high tech and everything was the
investment that we had in our universities in research. A lot
of that Federal investment but also State and private
investment. And it seems to me that we need to do a better job
of also making sure that the facilities, in response to Mr.
Bishop's question, was that you move the science to the better
facility.
We ought to also have facilities where the work is being
done. And as you know, in California, we grow more crops than
in any other State, it is the number one agriculture economy in
the United States. There are 17 crops that are only grown in
California. You visited my area. My one county of Monterey does
$4 billion in sales and a multiplier of $8.2 billion, employs
75,000 people in this county, collects $102 million in taxes
from the activity of agriculture, and yet we have a research
station that is World War II Quonset huts. And we have been
able to get the idea of co-participation, which you talked
about, co-investment, getting States to take some of the
responsibility. We have got the University of California, we
have got the community college, we have certainly the private
sector on board. We have got to upgrade that facility, and we
are not going to get there from here if we just do one at a
time.
You have put, for the first time, reestablished some money
in the capital outlay account, which is going to go to the
poultry facility, but I am wondering how aggressively you are
going to also seek for the rest of the list, which you went out
and prioritized what facilities in the country need to be
upgraded. And I am hoping that in that you will also weigh in,
which I think you do very well, is let's bring the science to
the field rather than making the field, you know, come all the
way back to Beltsville, Maryland, to get information.
Secretary Vilsack. Congressman, we have put together a
capital improvement plan, which I will make sure my staff gets
to you, which basically outlines precisely where our priorities
are. And the reality is that everyone can have a different list
of priorities, but I do not think anybody can disagree with the
process, which is that you take a look at the facilities that
you have, you take a look at the modernization.
[The information follows:]
Agricultural Research Service Capital Investment Strategy
The ARS capital inprovement plan has been provided to the
Subcommittee.
ARS RESEARCH FACILITIES FUNDING
Mr. Farr. I am not against that. I am wanting to get money
into that account so that you can do the work. That account was
zeroed out.
Secretary Vilsack. Well, I was going to get to that, that
there were resources and those were taken for other purposes.
Mr. Farr. Well, you can put them back. I mean recommend
they be put back.
Secretary Vilsack. Frankly, the reason we have done what we
have done with the poultry facility is to basically say to
Congress, if we are going to fund something, let's fund it and
let's not sprinkle the money out in 15 different pots only to
have it 2 years down the road basically scooped up because
there is some other greater need. In that circumstance, nothing
ever gets done, all right.
Mr. Farr. I totally agree. I am not in disagreement with
you. I want to get that program vigorously upgraded so that we
do not lose the capacity to keep that seed corn of intellectual
knowledge, and I think that is where we beat the rest of the
world. As long as we are ahead of them in our science and
application of that science to agriculture, we can stay
competitive, but we have got to make sure that the facilities
at least can house the equipment and the personnel that are
going to be that brain trust.
Secretary Vilsack. You are absolutely right, and that goes
in line with the comment that we have to invest in research,
which we have not done as much.
LIGHT BROWN APPLE MOTH
Mr. Farr. We will look forward to you aggressively
supporting new research.
We have got a real conundrum. USDA is circulating a draft
plan to deregulate LBAM, which is the light brown apple moth.
We have listed this moth as saying it is one of the top 15 pest
in the United States, invasive species. It attacks 250 plants.
This is your comments. You are circulating this to convince
foreign countries or other States that this is bad critter, at
the same time you are saying we have given up on trying to get
rid of it, we are going to leave it up to the State. And the
growers are stuck in the middle with this, growers are saying I
have got this product I am trying to sell to Canada or I am
trying to sell to Florida and now they are going to use the
LBAM as a reason for not bringing my product in. And USDA in
one hand is telling everybody how bad it is and other hand
saying you are going to deregulate it.
If it does deregulate, and I think it will, what are you
going to do to protect the growers' interest in being able to
move product to other States and to other countries?
Secretary Vilsack. What we are attempting to do here is to
find and walk a fine line between those areas that basically
are not impacted by this and the capacity of those areas to
actually export out of their county--interstate or
internationally--while dealing with the issue in the few
counties that are currently dealing with this. It is basically
trying to walk a fine line here.
Mr. Farr. But will it allow the States then, if you
deregulate and it is up to the States, and a State says we do
not like this light brown apple moth coming into our country,
we are not taking any product from Napa County, which is a
big--or from Monterey County, which, you know, grows almost all
the spinach and all the broccoli in the country. How are you
going to prevent the States from denying product from moving
from source into those States?
Secretary Vilsack. Well, and I will try to respond to this
quickly, Mr. Chairman. It is not easy to do this, but the goal
here is to allow those areas that currently are not problematic
to continue to trade and to allow those areas that are
currently dealing with this issue to deal with it without
compromising the ability of other areas to continue to trade. I
mean, it is a fine line we are walking here.
We will continue to work with States, we will continue to
work with folks to understand this, but that is what we are
trying to do here. We are trying to walk a fine line so that we
do not shut down the process completely for those folks who
have a completely free fruit that can be easily traded. We do
not want to shut that down. So you have got to figure out how
to do that.
Mr. Farr. Yeah, yeah, you do. Thank you.
Mr. Aderholt. Okay. We have been joined by the ranking
member of the full committee, Mrs. Lowey, so let me recognize
her now for any questions she might have.
SEQUESTRATION
Mrs. Lowey. I thank you, Mr. Chairman.
I apologize, Secretary Vilsack, but there are about three
or four conflicting hearings this morning, and I want to thank
you for your leadership.
I just want to say, I am deeply concerned about the future
of the Department of Agriculture. As you pointed out in your
testimony, which I did read, despite your best efforts the
upcoming negative effects of sequestration cannot be
forestalled. And I note with grave concern that already over
15,000 very low income rural residents, mostly elderly,
disabled, and female, will not receive rental assistance. I can
only wonder what is next and to what extent USDA's ability to
fulfill its mission will be further compromised in the future.
Your testimony expresses the Department's commitment to the
WIC program, which I have strongly supported. It also notes
that discretionary budget authority for 2013 is $1 billion
below 2009 levels. As you know, unlike SNAP, WIC is funded out
of the discretionary budget authority, has to compete against
other programs for funding year in and year out. If a solution
is not found to turn off the sequester, and I sincerely hope we
can do that together, do you foresee a situation similar to one
that the Department is encountering with its rental assistance
program for the WIC program where some need just goes unmet?
And if WIC will not have to go without, what program areas
will?
Secretary Vilsack. Well, WIC is a priority for us, and I
believe that this budget, in our view, will adequately fund WIC
for 2014. But you have mentioned rental assistance and that is
a problem and that is going to continue to be a challenge for
us in terms of the housing needs of the poor and elderly in
rural areas. There is no question about that.
You ask what gives. Well, we do not have as much resources
in other areas of our budget that will provide help and
assistance to the wide range of people we are helping in rural
America. But our budget does, in our view, adequately fund WIC,
but I will tell you, we are concerned about rental assistance.
This fall we will see, as you mentioned, 15,000 folks will not
get rental assistance. The question then is how does that
impact those properties and do they ultimately get to a point
where they cannot make their payments or do we get into
foreclosure circumstances? It is a consequence of the way in
which the sequester is crafted and the fact that we have very
little flexibility in what we do.
Mrs. Lowey. Well, I am glad your comments are on the
record, and I do hope we can work together on both sides of the
aisle to resolve the sequester, because to see the potential
impact on people who really cannot take it is devastating.
HEALTHY FOODS FINANCING INITIATIVE
I also want to mention the Healthy Foods Financing
Initiative. There are no funds proposed for the Healthy Foods
Financing Initiative in your budget. This was a major
initiative of the administration to utilize private and public
capital to build supermarkets in low income neighborhoods
without access to fresh foods. There was no funding proposed in
the fiscal year 2014 budget. Especially I was surprised that
one of the program's main goal was to leverage public dollars
for private capital to create taxpayer savings. How are we
going to address this issue?
Secretary Vilsack. Well, a couple of things. First of all,
we can use some of our regular program resources--our Business
and Industry Loan program, and the Value-Added Producer Grant
program--to help fund and support food hubs and grocery stores
and mobile units throughout rural areas to provide access to
food.
Secondly, we are attempting to reach out to those who have
an interest in this to encourage them, the private sector, to
respond. I will give you an example. We reached out to Whole
Foods and suggested that Whole Foods ought to consider their
responsibility, particularly in inner-city America. And to
their credit, they responded by going into Detroit. They are
going to ribbon cut in June a facility in inner-city Detroit,
which they have basically created a new model, if you will, for
their company that will try to respond to the food desert. Wal-
Mart is doing something akin to that. There are a number of
other groceries chains that have been responding.
And so we think through our regular programs and through
our efforts to educate and raise the awareness level, the food
atlas that we have that basically identifies where these food
deserts are, we think a combination of that will try to respond
to some of the concerns. Now, you know, in a perfect world, we
would love to be able to have resources for the Healthy Foods
Financing Initiative to partner with the Treasury Department
and HHS, who do have resources, and the New Market Tax Credits
available for that purpose. But in the meantime, we are going
to work to educate people about those programs and hopefully
facilitate more development.
Mrs. Lowey. I just wonder, you can get back to me, if there
is any way of getting the information. Are there any farmers
markets that go into these areas or are they----
Secretary Vilsack. Oh, absolutely, absolutely. We have had
a 175 percent increase. And I will tell you a program that we
have in Chicago. It is not a farmers market, per se, but we
have, working with Mayor Emmanuel, we have retrofitted some of
their old transportation buses, and they basically are like the
old ice cream truck, but except instead of ice cream, they have
got fruits and vegetables. We have equipped them with EBT cards
that SNAP beneficiaries could use, and they have available to
them fresh fruits and vegetables that they could purchase, that
travels around the neighborhood.
We are doing a similar thing in rural areas because
oftentimes the food desert issue is tough if you are 10, 15
miles away from a grocery store. If you have some kind of
mobile unit circulating around, it creates at least some
access.
Mrs. Lowey. Well, that is great, and thank you so much. We
wish you continued success.
And thank you, Mr. Chairman.
Mr. Aderholt. Thank you.
Mr. Fortenberry.
SNAP PROGRAM INTEGRITY
Mr. Fortenberry. Mr. Secretary, I would like to return for
a moment to the SNAP program. It is one of the largest programs
in the government, and the head of the Food and Nutrition
Service was here recently and we had a lengthy conversation
about that fact as it provides an important safety net for many
vulnerable persons. That is why it is all the more important
that we ensure the integrity of the program, and given that the
fraud and abuse rate is low and it has fallen significantly in
the last few years, particularly with the advent of the
Electronic Benefit Transfer, nonetheless there are still some
difficulties there with trafficking among retailers, that
problem, plus the lack of measures, aggressive or appropriate
measures, let's put it that way, to ensure eligibility among
some recipients.
And in that regard, I think you alluded to it earlier, that
the Inspector General recommended some changes to the program
that the Department has accepted that will allow for, I think
it is a 10-State model, to share data to ensure that those who
need the benefit are actually receiving it, that there is not
false identification, false Social Security numbers being used
as well.
A rough calculation based upon her testimony recently was
this could save us hundreds of millions of dollars potentially.
So I think that is what you were alluding to earlier as you are
discussing this.
Secretary Vilsack. Well, there are a series of steps. One
is we have asked in this budget for additional resources to
hire additional data mining experts; additional certification
personnel to make sure that we are doing a good job of making
sure that the people qualified for the program actually get it;
additional investigators. I will tell you that last year there
were over 800,000 reviews and inspections of individuals, and
there were several thousand reviews of grocery stores where we
basically saw trends or concerns.
There is also the issue of the definition that we will be
addressing in the 5-year farm program. You know, what grocery
stores ought to be qualified to provide SNAP and are there
areas where we see high liquor sales, high cigarette sales that
we often see connected to the kind of conduct that we do not
want, are there ways in which we can assure that grocery stores
are the ones benefitting from this program and that people have
access. And so there are a variety of ways in which we can
address this.
And it is not just SNAP. It is also--we need to look at
integrity in our school programs, we need to look at integrity
in our WIC program, in our TEFAP program, so you will see
throughout the budget that there is additional resources for
evaluation, for additional review, because we take this issue
of integrity, as you point out, very seriously.
Mr. Fortenberry. Well, the Inspector General alluded to the
fact that the Department accepted their recommendations, and I
think that was the earlier conversation. I did not hear it all.
But to ensure again the integrity of data and to double-check.
Secretary Vilsack. Right. It is integrity. It is also just
errors, just innocent errors that can also cause additional
expense.
Mr. Fortenberry. Again, because of the size, the total
expenditure of the problem, even a small drop in fraud actually
saves us lots and lots of money.
Secretary Vilsack. Right. And honestly, it is not just the
SNAP program. It is not even just the nutrition programs. I
think we have a responsibility, as the Chairman alluded to, to
taxpayers. I mean, there is also an issue we are taking very
seriously on crop insurance, because the percentage of error
and fraud rate is higher in crop insurance than it is in SNAP.
Obviously, those programs are different in terms of size, but
if even you reduce the error rate in crop insurance, you are
talking about tens of millions and potentially hundreds of
millions of dollars in savings as well. So, it is incumbent
upon us to continue to be focused on integrity.
FARMLAND VALUES INCREASE
Mr. Fortenberry. We had a hearing several years ago on the
land price increases on the Ag Committee. The basic finding was
that this is not substantially due to leveraging of credit;
therefore, the conditions leading to a potential bubble are not
exactly the same as they were in the 1980s.
Now, we have seen land values continue to escalate. I am
sure, in your neighborhood, farmers are raising their eyebrows
as to how much these farms are selling for. Now, given that the
returns in the market for everything else is so low, you
probably have large amounts of, in effect, cash being plowed
into these investments, which have a small return but
nonetheless very stable return. Is that the findings of the
Department still, that the potential for a land valuation
collapse is mitigated by the fact that this is not being
leveraged aggressively by credit?
Secretary Vilsack. Well, let me briefly answer this and
then maybe Dr. Glauber could elaborate. I do not think we are
faced with nearly the same circumstance we were faced with in
the early 1980s where people were over-leveraged.
Notwithstanding that, I think there are concerns in terms of
land value and in terms of cash rent issues and the ability of
young people to get into this business or to be able to
maintain the business.
Doctor, I do not know if want to----
Mr. Glauber, Yeah. I would just say, you are absolutely
right, we have seen this dramatic increase in farmland prices.
I think it is fully consistent with the fact that we have had
very strong farm income and low interest rates. I think both
those have been very big factors in seeing the sorts of
increases that we have seen, particularly in the Midwest.
Should that slow, you know, we are projecting farm income
to flatten a bit. I think over time people are expecting
interest rates to rise a little bit, so that certainly would
have some impact on that growth in land prices that we have
seen. But you are absolutely right. I think the good thing and
the big difference in what we saw in the 1980s is the fact that
real estate debt has not been going up. The leveraging, I
think, banks have been very prudent about lending and people
have basically been doing that with cash on hand, buying land
rather than, you know, leveraging their assets.
Mr. Aderholt. Mr. Bishop.
ARS RESEARCH FACILITIES
Mr. Bishop. Thank you very much.
I want to return back to the ARS and the research, and I
appreciate Mr. Farr's take. You know, of course, Mr. Secretary,
you mentioned the multiyear facility plan for capital
investment which obviously the research facilities across the
Nation have contributed significantly in making us among the
best in the world with agricultural output and production. But
as you are aware, there are a considerable number of facilities
that are in pretty bad shape, in great need of improvement. Of
the 25 facilities that ARS ranked as being in the worst
condition, the agency recommended immediate allotment of
capital investments for less than a third of them. And of
course, I know that our fiscal environment is very challenging,
and for these facilities, particularly given the research value
that they hold for the commodities that they support, what
options do we have for them, and what options do we have for
the facilities that are not slated for incremental funding and
capital improvements, given the research value that they hold?
I have a facility, for example, in Byron, Georgia, which is
the Byron laboratory, which we talked about peanuts and poultry
already, but we have got some other P's, pecans and peaches,
that that laboratory fully supports. And Mr. Farr mentioned the
partnership and perhaps some incentives for involving State
universities and private, I should say, industry interest in
combining with you and partnering in developing support in
these research activities.
Can you explore any options? Are there other options that
we could look at? For example, we have got one of the 1890s in
our district, Fort Valley State University, that is interested
in partnering or acquiring somehow the Byron facility because
it is so vital to the peach, as well as the pecan research, and
we have got a gene bank there in Byron that is second to none
in the world for pecans.
Secretary Vilsack. Well, Congressman, first of all, you
know, let's be clear about this. The more opportunity in
research that we can do, the better, as far as I am concerned,
and that is why, you know, we are making the case that we need
to invest more in research.
There are some facilities that probably have outlived their
usefulness and where research that is important can be done in
some place that is more efficient and more effective, and then
that means what happens to that facility if we close it. And I
will tell you from the experience of the labs that we have
closed, we work with universities, we work with land grant
universities, we can work with historic black colleges, we can
work with our university partners to take over that facility.
And in fact what we have done with several of these
facilities is also to encourage them to use this as a beginning
farmer and rancher development opportunity because oftentimes
these facilities are surrounded by land, and the question is,
what happens to that land? Well, that land could be made
available in a beginning farmer or rancher program and in some
cases tied to returning veterans. So we are exploring creative
ways to utilize those facilities, perhaps not at our expense,
but to make sure that they continue to have some useful
purpose. And we would be more than happy to work with any
college or university for any of these facilities that
ultimately have to be closed.
Here is the economic reality. We cannot, based on the
budget as it exists today and based on the fact that our
discretionary budget is below where it was in 2009--so I am
dealing with not 2013 or 2012 or 2011 or 2010, I am dealing
something below 2009--as long as that continues, and I suspect
it will, we are going the have to make tough choices. You can
disagree with our choices, fair enough, but you are going to
have to make those same choices because there are only so many
dollars.
2501 PROGRAM AUDIT
Mr. Bishop. Let me jump in on the 2501 Program audit. The
Inspector General completed an audit of the Office of Advocacy
and Outreach, which is a part of your office and was
established to assist farmers and ranchers who have moderate-
sized operations. You are familiar with that. I am a very
strong supporter of the 2501 Program and welcome all of the
additional efforts which are aimed at improving the
administration of that grant assistance program.
The IG's audit cited a number of missteps in administering
the program on the part of some of the employees, as well as a
general lack of management facilities in the grant-making
process. Assuming that that recommendations are put in place
and carried out fully, and I noticed that the OAO staff
acknowledged and accepted all of the IG's recommendations, are
you confident that moving forward, the program will be managed
in a proper manner and will be able to carry out its function,
particularly given the fact that I think it is proposed that
veterans will be included as a group that will be able to take
advantage of it, which means that you will have more people
accessing that limited program with basically fewer resources.
Secretary Vilsack. Congressman, I requested that audit,
personally requested that audit, and as a result am personally
assured by the team that is now engaged at OAO that those audit
recommendations will be followed and that our program will be
much tighter and much better, perhaps more competitive, but
nevertheless much better managed than it was. And I accept
responsibility for the fact that it was not managed as well.
That is why I asked for the audit, and I think we have made
changes already to institute many of those audit
recommendations.
Mr. Bishop. Thank you, sir.
Mr. Aderholt. Mr. Yoder.
WIC PROGRAM ELIGIBILITY
Mr. Yoder. Thank you, Mr. Chairman.
Mr. Secretary, I appreciate your continuing conversation
here this morning. I want to talk with you a little bit about
the WIC program and the recent GAO report that came out earlier
this year regarding the amount of Americans that are
participating in the program and some eligibility issues and
implementation amongst the States. I do not know if you are
familiar with the report, but according to the report, over 60
percent of the States use income only within the last 30 days
when the standard for WIC eligibility is annual household
income. States also only allow the income of the mother and
child to be counted instead of the income of every member of
the household. I am sure you are familiar with that.
And then the adjunctive or category of eligibility, many
States have increased their eligibility threshold beyond 185
percent of the Federal poverty level that the WIC program sets
as the maximum threshold for eligibility. In fact, the GAO
finds that 13 States use SNAP eligibility at 200 percent, 25
States set Medicaid eligibility over 185 percent, some States
set their Medicaid expansion of SCHIP as high as 300 percent,
and yet those folks are automatically eligible then for WIC.
And what the result of all this is, is over half of the
infants in this country are now enrolled in the WIC program,
and GAO finds that, according to the standards of WIC, that
would not be the case. And so I guess my question is--well, let
me first case say, I guess, the GAO also finds that the FNS has
never examined these reports for State and local WIC agencies'
compliance with Federal regulations despite over one-third of
the States having problems in this area and that the last time
FNS provided guidance to the States on income eligibility
determinations was in 1999, some 14 years ago.
My questions are, Mr. Secretary, what does FNS intend to do
with these reports and how will increased technical assistance
and training to the States on income eligibility determinations
and what specifically will be included in any new income
eligibility determination guidance that the FNS issues to the
States?
Secretary Vilsack. Congressman, I appreciate you raising
the question, and I will try to be responsive, but I suspect
that we will have to supplement my response with additional
information, which we will be happy to provide.
As I stated earlier, this whole issue of integrity is
important to us, and we are focused on a couple of things in
reference to WIC. Our focus primarily with the States has been
in the past their inability to focus on proper providers of
WIC. We have seen circumstances in situations in States where
grocers take enormous advantage of the WIC program and
essentially hike up the price of WIC products and then provide
discounts on other products in an effort to try to get people
into their store. And so that has been a focus of our efforts
in a couple of States, to sort of stop that practice.
You know, we obviously have a responsibility to make sure
these programs are managed properly. I will be more than happy
to talk to my team about the steps that we are specifically
taking as it relates to those studies, and my team will get
back to you very quickly with that response.
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PROGRAM IMPLEMENTATION
Mr. Yoder. I appreciate that, Mr. Secretary. I think
certainly this is a report that was, I think, disturbing to all
of us. We want to ensure and work with you to make sure that
those who are most needy receive the services, and we also want
to make sure that these programs are being implemented
uniformly in States, and this State implementation that is
occurring that has a lot of States essentially misapplying the
rules and FNS not following up is a big concern to a lot of us,
and we hope that you will make this a priority because as we
work to find the resources in this budget to make sure we meet
your priorities--and you talked about a lot of them, ag
research, and we talked about crop insurance programs
certainly, and you have mentioned integrity in whole sorts of
programs. The GAO has some specific things that your
Departments could implement that would save taxpayer dollars,
ensure that those dollars are getting to people who need them
most, and make sure that we are, you know, providing a system
that is effective and consistent across State boundaries.
Secretary Vilsack. That is a legitimate concern,
Congressman. And this is by no way an explanation, and I do not
even know if it is accurate everywhere, but as a former
governor, I know that when you are faced at the State level
with difficult budgets, oftentimes what happens is staffing
levels get reduced, and departments of human services are
places where these programs are being administered, and
essentially sometimes it is--and honestly, I frankly think that
is one of the challenges and risks we have as we reduce
workforce, and we have done this at USDA. I mentioned 5,000
staff years. You get to a point where the oversight of the
program is not what it needs to be. And we need to keep a very
wary eye on this.
I am particularly concerned about rural development in my
area where we have got a portfolio of $183 billion and yet we
have seen a substantial reduction of 2,000 staff years at rural
development since 2009. So, I do not know that that is the
reason, it may not be the reason, but it is an area that I
suspect is some of the reason that you have got the concerns.
Mr. Yoder. And I appreciate----
Secretary Vilsack. We should look into that.
Mr. Yoder. I appreciate that point, Mr. Secretary, and in
this case you have got a GAO report that has done some of that
oversight for you, so hopefully you guys can dive into that and
maybe come back to us with some responses of how we can meet
some of the challenges laid out there.
Secretary Vilsack. Fair enough.
Mr. Yoder. Thank you, Mr. Secretary.
Mr. Aderholt. Ms. Pingree.
SNAP BENEFITS AT FARMERS MARKETS
Ms. Pingree. Thank you, Mr. Chair.
Thank you, Mr. Secretary.
To follow up on somewhat of a different perspective on the
SNAP program, I was really pleased that one of the USDA's key
performance measures for fiscal year 2013 was to increase the
amount of SNAP benefits redeemed at farmers markets. For a
whole variety of reasons we have been tremendously supportive
of that. As you mentioned earlier, the number of farmers
markets is growing every day. People's access to them is
increasingly available. And it allows people who have limited
economic means often to procure fresh vegetables and fruits and
educate their families around using them.
So, I am just interested to know how successful you have
been in meeting the goal. Are there additional resources that
are needed to help those efforts? I think it is one of those
things just, I have to say again, it is widely supported by
people of all political stripes and ages and rural and urban,
and it is one of those things I know in my communities, when we
talk about making it easier to use your SNAP benefits at a
farmers market to buy fresh healthy food, people just say,
``wow, what a great idea'', let's make sure we are doing plenty
of that.
Secretary Vilsack. Congresswoman, I think you would find
that with the existing resources, we have been able to expand
that opportunity to thousands of farmers markets and we have
seen obviously a significant increase. And one area, in
particular, is among senior citizens. Oftentimes when we talk
about SNAP, we talk about young families, as we should, but
there is a percentage of SNAP beneficiaries who are senior
citizens who oftentimes do not have access to those fresh
fruits and vegetables, and we have seen a rather significant
increase in the number of seniors that are eligible.
One of the things we are going to keep an eye on is the
impact of sequester on the number of people we can provide help
and assistance to. We are concerned that we are probably going
to see a slight downturn in some of that assistance because of
sequester, but we are going to continue to be committed to that
effort.
You know, we think it is a great community builder. We
think it is an opportunity for smaller producers to have
additional markets, and obviously it is an opportunity for
people to be able to buy fresh fruits and vegetables. I would
say that one of the things that we are looking at is, the way
in which SNAP is currently configured, oftentimes your SNAP
card is filled in at the beginning of the month and it is
sometimes difficult in the middle or the latter parts of the
month to be able to have anything on your SNAP card to be able
to buy fresh fruits, and some things do not keep 30 days. So we
are looking at ways in which we could potentially alter the way
in which the SNAP card is administered so that, you know, maybe
you get half of it at the beginning of the month and half of it
in the middle of month so that you have an opportunity to buy
more fruits and vegetables that will not spoil.
Ms. Pingree. And I would say, just to follow up on that, I
know, you know, one of the issues that you have been certainly
doing some work on, but it is not completely solved, is farmers
markets themselves being able to take SNAP cards and the
electronic technology to do that. And I know there has been
some pilots around that, but in a very rural State like ours,
that can be complicated for the administrators of the farmers
markets or the individual farms.
While you are thinking about how benefits are distributed,
we have had a lot of people talk to us about the idea of SNAP
beneficiaries being able to participate in CSAs. That is just
growing very fast. Again, seniors, people in rural areas who
sort of planned ahead, but because of the way the funds are
administered, it is very hard for them to have any SNAP money
available to do something like that up front, but perhaps we
can get creative about making that possible, because, again,
that is a dependable source of fresh fruits and vegetables that
come monthly, weekly, biweekly, something into a person's home,
and you know, encourages eating those foods, and also keeps
people healthy and gives farmers really a great new market.
Secretary Vilsack. That latter part, latter point, is an
administrative challenge but maybe there is a way in which
those CSAs could be affiliated with an enterprise that already
is SNAP eligible. That is a possibility.
RURAL WATER AND WASTE PROGRAM
Ms. Pingree. One other quick question, since I have some
time. This is on another area, the rural water and sewer
projects. So I see that the budget proposes elimination of
rural water, sewer grants in favor of low-interest loans. As
you know, USDA is the single largest source of grant funds for
community facilities, but in many cases small communities
simply do not have the economies of scale to absorb 100 percent
of the loan financing, and I represent 125 communities and many
of them are small rural communities.
Can you provide some additional detail on what those
communities are supposed to do under the new structure, what is
the backlog for the demand on this financing, and how much of
that is loan versus grants?
Secretary Vilsack. Well, we are reducing the grant portion.
We are not eliminating the grants. There is still, I think,
roughly $320 million or so in grant money and about $1.5
billion total between grants and loans. We think with the lower
interest rates, it basically makes that loan program a bit more
attractive and a bit more feasible to use.
Having said that, there is a significant backlog of these
projects, and it is one of the reasons I traveled to New York
City last week to meet with investment banks to see whether or
not we could in some way, shape, or form, educate them about
projects that are in rural areas that they would not otherwise
think about that would provide a potential return, and in fact,
also reaching out to companies that are looking to fulfill
social responsibility requirements and potentially utilizing
the water programs as a way of doing that and still get a
slight return for their investment.
The key here is making sure that as we reach out to
investment bankers, that we can sweeten the pot enough that
they become interested, that their return is consistent and
competitive, which we are going to try to do. And I think this
is part of our strategy to figure out creative ways to leverage
our resources so that we can stretch them further and do more
projects, even though we may have fewer dollars to deal with.
So this is our effort.
Ms. Pingree. Great. Well, I will be interested in hearing
if that yields results. So thank you for trying to be creative
there.
Thank you Mr. Chair.
Mr. Yoder [presiding]. Mr. Farr.
NUTRITION ASSISTANCE PROGRAM INTEGRITY
Mr. Farr. It is very interesting that we are able to in
this committee sort of present the philosophies of two worlds
out there, the world that I grew up in, which was war on
poverty, Peace Corps, sort of a trust that dreams could be
fulfilled, and another side of the world that is more
suspicious. You know, we are security minded and we got to make
sure that people do not cheat and that, you know, the wrong
folks do not get benefits.
I think you are right in the middle of that war, and I see
it, frankly, all carried out in our food assistance programs,
whether they be WIC or SNAP or the programs in schools. And the
war I see is that you are fighting a tradition which the
beneficiaries of that, of our policy on feeding the public,
feeding poor people and feeding kids that are from low income
families, is that the war is what you are going to feed them,
whether you are going to move to a nonregulated, nonsubsidized
industry and the specialty crops, which is all the nutritional
stuff, or whether we stick with the old program, which is the
traditional commodities and so on. And, you know, when you can
sell a chicken McNugget at a school level cheaper than a head
of lettuce, you know that something is wrong with all the
processing you have to go through and all handling you would
have to do to get that chicken McNugget to its place versus the
minimum amount of handling for lettuce.
So, you know, it is a war on the diet. It is also a war on
this issue of trust. I think people find the abuses and say,
you know, taxpayers' money should not be spent on those abuses.
Some would argue, well, in light of all the things the
government spends on, that is kind of de minimis, why are we
spending so much time and money trying to catch the cheaters
because the cost of administration is so great?
So in this, you know, in this program, I think you are in
the position where you can solve both sides, because they are
not going to go away. One side is not going to give up to the
other. So it is going to have to be how do we use technology,
how we educate the electorate and people like us as to the
benefits. I mean, one of the things that I think the Department
does a poor job is showing all of the people who receive the
WIC funding, I mean, the stores, where that money ends up in
that private economy out there. You are talking about starting
up businesses for farming practices, for vets and things, where
are they going to have that market? And oftentimes it could be
a small market, it could be stopped by, you know, you can be
selling the WIC food next door.
This is what a young gal did in organic. She went right and
set up her stall next to the WIC office and she is booming. She
is in her second generation. The women walk out the door and
there everything they are allowed to buy is right there in the
farmers market, and that is what she makes her whole living on.
And so there is a benefit for those expenditures in the private
sector and it can grow businesses, and we do not take advantage
of taking about that, where the SNAP money ends up and where
the WIC money and where the school lunch program.
But I think on the fact that, you want to make sure that
there is security, but you do not want so much security that
the administration of that outweighs the benefit, and I think
that is the dilemma that Congress has got itself in. They want
this accountability, which is going to be very costly.
So my question to you is, are you working to develop
technologies using bar codes, using all this kind of stuff?
When you think about it, the person who has that SNAP card is
bar coded, because you know who that person is, because they
qualified for the card, and on that card there is a sign. And
the food they are buying, I do not know whether it is
registered, but everything you buy in the store is now bar
coded. So the food is bar coded, the person is bar coded.
Mr. Farr. I don't know whether the seller is bar-coded. You
know, there is that information. Can we use technology as
banking and financial institutions do to catch the cheats
rather than just this high kind of concentration on labor
reviews?
Secretary Vilsack. Well, I think we are doing that. And you
are probably right, we don't do a good enough job explaining
that to folks. But we are using technology.
The data-mining utilization is allowing us to basically
track where there is high-risk areas that allow us to do
investigations and reviews, which have led to literally
hundreds of stores no longer qualifying for SNAP and thousands
of people disqualified from the program because we were able to
identify through data mining and through a review of the
information where there were problems. And that is one of the
reasons why the fraud rate is at historic lows and why the
error rate is at historic lows. And it is one of the reasons
why we are going to continue to do more of that. It is one of
the reasons why we have asked for additional resources in this
budget to be able to do more of that.
So, yes, we are doing it. We obviously need to do a better
job educating folks about it.
Mr. Farr. You mentioned in a speech recently that the
nutrition programs are under attack. Could you outline how you
are going to respond to that attack. Is that what you just
said?
Secretary Vilsack. Well, there are several responses to it,
and, again, I probably need to do more of this. But we talked
about the fact that every dollar that is spent in the SNAP
program generates between $1.80 and $1.90 of economic activity.
I was in a grocery store in South Dakota not long ago
talking about the fact that when people are able to purchase
more with SNAP, they actually do purchase more; that 95 percent
or 97 percent of the resources are spent within 30 days; that
that rolls around in the economy because more groceries have to
be stocked, shelved, packaged, processed, trucked, shipped and
produced, all of which create throughout the supply chain jobs.
So we obviously need to do more of that.
Part of the challenge that I have as the Secretary of
Agriculture is that the portfolio of agriculture is so broad.
You know, I am going out to your State today, unfortunately not
to talk about SNAP, but to talk about forest issues, which
obviously are very, very important. And we are also going to
have the opportunity to talk with the mayor of Los Angeles to
talk about urban forests. That is not an issue that gets as
much attention as it should.
We just do a lot at USDA, and we are going to continue to
try to do the best we can to educate folks, but we obviously
need to do more in this area.
Mr. Farr. My time is up.
Mr. Yoder. Mr. Bishop.
Mr. Bishop. Thank you very much.
ANIMAL ANTIBIOTICS
I would like to shift the subject to animal antibiotics.
According to the Infectious Diseases Society of America, nearly
2 million Americans each year develop hospital-acquired
infections resulting in 99,000 deaths, a steadily increasing
number due to antibacterial-resistant infections. The Director
General of the World Health Organization last year warned that
things as common as strep throat, or a child's scratched knee
could once again kill.
Currently medically important antibiotics sold for food
animal use constitute more than 70 percent of the total
reported sales of medically important antibiotics in the U.S.
It is my understanding that the Department plans on launching a
biotherapeutic discovery program, which would be aimed at
developing and providing alternatives to animal drugs and, in
particular, antibiotics. Can you share with us your thoughts in
this area, and are you coordinating with the FDA, the CDC and
others in the development of this?
Secretary Vilsack. Congressman, first of all, as you know,
the FDA is promulgating some guidelines and some rules in this
area, and we have been working with them in the promulgation
and the establishment of those guidelines and rules. And, in
fact, we have jointly gone out into the countryside and had a
series of events where we are educating producers about
precisely what they are or are not requiring at FDA.
We think part of our responsible approach to this issue is
for us to continue to do research to find if there are
alternative ways in which we can deal with disease, animal
disease, so that we can continue our responsibility to protect
our animals and to increase productivity. That will always be
part of our mission. And this is an area that we feel very
strongly about.
In an effort to try to use scarce resources most
effectively, we prioritize our research, and this is an area,
animal production and productivity, which is one of the
critical areas of responsibility and a critical area of
emphasis at USDA.
ORGANIC AGRICULTURE
Mr. Bishop. We have a burgeoning interest in Georgia in
organic agriculture, and we have got a number of, at least a
few, very successful organic producers in our area, and they
are beginning to look at this and to raise concerns as to what
the impact will be on their industry, because they develop a
niche product for sophisticated palates, as they put it, people
who really want to have--to consume the kind of food that is
healthy, and environmentally friendly, and ultimately good for
everyone.
So that is an issue that is really becoming--moving to the
forefront, and I appreciate, and I am sure that they will
appreciate, the Department's entry into this and interest in it
as you develop this research, because it is really, really
important for this segment of the population and of the
producers.
Secretary Vilsack. Do you want me to respond to that?
Mr. Bishop. If you would like; if not, I don't want you to
talk for the sake of talking.
Secretary Vilsack. Just one aspect of this, and that is one
of the challenges at USDA is to make sure that we respect and
appreciate all forms of production. And part of maintaining
that value, that high value that you referred to, is making
sure that we do a good job of protecting the standards that
create that high value, and we are very committed to that.
Mr. Yoder. Any other questions?
Ms. DeLauro. If I can.
Mr. Yoder. Ms. DeLauro.
SEQUESTRATION AND BUDGET CUTS
Ms. DeLauro. Thank you very much.
Mr. Secretary, I know in your testimony you allude to the
across-the-board cuts imposed by USDA, but what I want to do is
to try to get some more detail. If could you briefly tell us by
agency how sequestration and the budget cuts will be handled,
and specifically which agencies you expect to have to furlough
employees and for how long. How will the recipients of
programs, for instance one that you mentioned, such as rental
assistance, be affected by the sequestration?
Secretary Vilsack. Congresswoman, basically 1,500 fewer
farmers will receive credit as a result of sequestration.
Between conservation planning and conservation resources,
roughly 15,000 producers will not be able to get the kind of
conservation help that we would have expected them to get. We
probably have somewhere between 100 to perhaps as many as 200
fewer research projects that will be funded. We will obviously
do fewer business----
Ms. DeLauro. On the research projects for 1 second, that
ties in with the research facilities in particular communities,
or districts, or States, et cetera?
Secretary Vilsack. It is more of the NIFA program, the
competitive grant program, which obviously impacts or
potentially could impact a wide variety of universities and
communities that are serviced by those universities.
In the area of rental assistance, we understand and
appreciate that come September, or perhaps as early as August,
we will run out of resources in that rental assistance fund,
and we will basically have to say to roughly 15,000 recipients
that we are not going to be able to provide the rental
assistance that we would normally provide.
Ms. DeLauro. What happens to those folks?
Secretary Vilsack. Well, they just don't get the rental
assistance, and the question then is what happens with them in
their apartment complex, and what happens to the owner of the
apartment complex if they don't get the kind of support that
they were banking on to be able to maintain the project? So we
are just going to have to see. I don't know that we have a
really good answer to what happens other than we are going to
be out of money, and that is a consequence.
As you know, Congress did address the poultry inspection
issue, and so the food inspections will continue.
Ms. DeLauro. Yes.
Secretary Vilsack. It provides adequate resources, so we
don't anticipate furloughs there. If we furlough workers, it
will be in primarily two areas, in Rural Development and in the
Farm Service Agency offices. The amount of time somewhat
depends on, you know, our ability to transfer resources from a
couple of accounts, but it could be somewhere between 4 to 7 to
as much as 10 days of furloughs in those areas. Obviously if
folks are furloughed, then work isn't going to get done.
The reason why the numbers aren't greater than they
otherwise would have been was because 2 years ago we started
this process of our Blueprint. We understood that we were going
to be faced with difficult times, and we have reduced travel,
we have reduced our footprint, we closed offices, we have
reduced our workforce, we have used early retirement incentive
programs. We have done everything you would expect an
enterprise to do to try to be as efficient and as effective as
possible, so it minimized the impact on our workers.
The goal here was to try to avoid as much furloughing and
RIFs, reductions in force, as possible without sacrificing
service, but with the sequester and the additional--not just
the sequester, but the additional 2\1/2\ percent cut that was
put on top of sequester--maybe other agencies and departments
of government got hit that hard. If they are, I am not aware of
them. And I suspect, although I don't know this is accurate,
the discretionary budget authority for most of the departments
is not below 2009 levels, which is the case at USDA.
Ms. DeLauro. Thank you for describing that. I think it
still is relatively unknown with many of my colleagues the
depth of the cuts. And as you talk about rural areas, as you
talk about the FSA offices, I can remember on this committee
several years ago when there was the move do some consolidation
on FSA offices, and there was such an enormous outcry that we
couldn't get to consolidation.
Now when you are going to look at places just without
staffing, and they may close up, I am not sure, I am not sure
that there is a granular understanding of what this means in
reality to the population of people that you are talking about.
And we are talking about end of fiscal year, and this is in not
end of the year December, but we are talking September and
having to really come down with this hammer on these various
populations. It is really pretty extraordinary.
Secretary Vilsack. One of the populations that will get
impacted that may not be on anybody's radar screen, but we have
mentioned farmers markets and things of that nature, is tens of
thousands of fewer seniors and fewer folks will be able to take
advantage of those farmers market opportunities as well. That
obviously will have a rippling affect in those communities and
for those producers. So, you know, I don't think we have seen
that rippling effect, I think it is going to take a while for
it to be fully appreciated, but it is coming.
Ms. DeLauro. I would like to work with you, Mr. Secretary,
on outlining all of those things, because I think we need to
call it to the attention of everyone who serves in this body.
And you know what? It also being made to the attention of the
people they represent. Thank you.
Mr. Yoder. Mr. Farr.
Mr. Farr. Thank you, Mr. Chairman.
One piece of advice if you are going to California, I think
what Washington has failed to do is to ask California how they
handled the furloughs. We did it for about 4 years, and we
closed a lot of offices on Fridays and things like that. I
think the State is, you know, in a lot of key issues where you
can't really afford to furlough people. Researchers even came
in on their day they were furloughed and kept working even
though they weren't getting paid.
Secretary Vilsack. We can't do that.
Mr. Farr. I know. And they didn't order it; that was just
the workers' intention.
The point is that I think there were a lot of lessons
learned. It is a big State, budget the same size as yours, and
you might get some advice while you are out there.
Mr. Yoder. Thank you, Mr. Secretary. Appreciate your
testimony today, and the meeting is adjourned.
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Wednesday, April 17, 2013.
USDA RESEARCH, EDUCATION, AND ECONOMICS
WITNESSES
CATHERINE E. WOTEKI, UNDER SECRETARY, RESEARCH, EDUCATION AND ECONOMICS
EDWARD B. KNIPLING, ADMINISTRATOR, AGRICULTURAL RESEARCH SERVICE
SONNY RAMASWAMY, DIRECTOR, NATIONAL INSTITUTE OF FOOD AND AGRICULTURE
MARY BOHMAN, ADMINISTRATOR, ECONOMIC RESEARCH SERVICE
CYNTHIA CLARK, ADMINISTRATOR, NATIONAL AGRICULTURAL STATISTICS SERVICE
MICHAEL YOUNG, BUDGET OFFICER, DEPARTMENT OF AGRICULTURE
Introduction of Witnesses
Mr. Aderholt. Good morning. Welcome to the Subcommittee.
Thank you for joining us on the ag appropriations Subcommittee
this morning and, of course, for the discussion on USDA's
fiscal year 2014 budget request for research agencies.
I want to welcome Dr. Catherine Woteki, Under Secretary for
Research, Education and Economics. And also joining the Under
Secretary today we have Dr. Cynthia Clark, Administrator for
the National Agricultural Statistics Service; Dr. Mary Bohman,
Administrator for Economic Research Services; Dr. Ed Knipling,
Administrator for the Agricultural Research Service; Dr. Sonny
Ramaswamy, Director of the National Institute for Food and
Agriculture; and welcoming back Dr. Mike Young, Mr. Mike Young,
for USDA's Budget Director.
Opening Statement
Thank you all for being here and for your presence before
the subcommittee today. In particular we are interested in
NIFA's budget proposal for AFRI and sustainable agriculture,
organic, specialty crop and integrated research programs. We
need to hear NIFA's explanation for why it did not comply with
congressional direction regarding its budget proposal for these
programs. This is an important part of answering the question
of whether USDA is effectively meeting its broad mandate in
research.
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Mr. Aderholt. At this time I would like to recognize the
gentleman from California, Mr. Farr, for any opening comments
or statements he may have.
Mr. Farr. Thank you very much, Mr. Chairman.
Yesterday, the Secretary pointed out how important it was
to invest in research to keep the seed corn of intelligence in
America, and how these are the folks that manage all that, and
I look forward to it.
I am just curious. One of the programs that the Secretary
outlined, and I think I am very appreciative of his focus on
it, is rural poverty in America and how we take the poorest
areas, which have always been applying for grants or not even
having the capacity to apply for grants, and focus on more of a
strategic strategy. And I just wondered how all your research
has been able to prioritize those areas, and perhaps telling us
what are the poorest areas and how we might--because there is
infrastructure issues. If you are going to publish a lot of the
stuff, we know these rural areas don't even have broadband,
don't have access to the Internet. And I hope that we are going
to be using all of the capacity of our intellectual brain
trusts here to help solve some of these problems.
Then I have some specific questions about specialty crops
in my district.
But I thank you for having this hearing.
Mr. Aderholt. Thank you, Mr. Farr, for your comments.
Mr. Aderholt. At this time I would like to recognize Dr.
Woteki for your opening statements for the record. Then we will
go into questions. I look forward to hearing from you.
Opening Statement
Dr. Woteki. Thank you, Mr. Chairman, and good morning to
you and to Ranking Member Farr. We are pleased to appear before
you to discuss the President's budget request for fiscal year
2014 for the Research, Education and Economics mission area.
Each of the agency Administrators and I have prepared written
testimony that we would like to submit for the record, and I
will briefly summarize the content of those five sets of
testimony.
There is a common theme that runs through our testimony,
and that is the support that these research agencies provide to
our Nation's farmers, producers and consumers. We achieve that
through a combination of cutting-edge research as well as
public education and scientific literacy programs. We also, in
the implementation of our programs, work closely with the land-
grant universities in an historic partnership that we
celebrated last year, the 150th anniversary of the Morrill Act.
But the challenges that are facing American agriculture are
large, and they are also very clear, and those include
expanding our ability to deliver safe and nutritious food to a
growing population, both in the United States as well as
globally; keeping agriculture production profitable; bolstering
our ability to continue to export agricultural products;
reversing the obesity epidemic; and ensuring that our natural
resources remain available and abundant for future generations
while responding to the threat of a changing climate.
Investing in agricultural research is critical to the
innovations that keep our agricultural sector productive and
that ensure positive benefits to our economy. Investments in
agricultural science increase productivity that is essential
for the long-term prosperity of our Nation. In fact, for every
dollar that we invest in agricultural research, there is an
overall return to the U.S. economy of $20.
For the Research, Education and Economics mission area, the
budget request for 2014 totals $2.8 billion. For the
Agricultural Research Service--ARS the request is $1.28
billion, and the budget makes allocations of $4.6 million to
centralized information technology systems in ARS. It provides
funding for priority initiatives that will improve production
efficiencies through sustainable agriculture, helping farmers
mitigate the effects of climate change, protecting crops at
high risk of infestation from insects, and also continuing the
development of alternative fuels and building on ongoing
research on the earth sciences.
Last year in this Committee's report, they directed the
Agricultural Research Service to develop a study and to
prioritize the Agricultural Research Service's infrastructure
investments. We provided that report to the committee last
fall, and this budget requests $155 million for the number one
priority on that infrastructure renewal list. It is a
replacement facility for the Southeast Poultry Disease Research
Laboratory in Athens, Georgia.
The second agency's request is the National Institute of
Food and Agriculture--NIFA and the budget proposes a funding
level for NIFA of $1.29 billion. This would fund the capacity-
building programs at land-grant institutions as well as
competitive grants programs.
For fiscal year 2014, the President's budget requests an
increase to a total of $383 million for NIFA's flagship
competitive grants program, the Agriculture and Food Research
Initiative. To improve transparency and accountability, the
President's budget provides $7.8 million to consolidate and
modernize NIFA's grant management systems.
The President's budget reorganizes several science,
technology, engineering and math programs, what we call STEM
programs, into the Department of Education and the National
Science Foundation, and this budget reflects transferring
NIFA's STEM education programs to those agencies. NIFA,
however, will continue to support secondary and post-secondary
students in other ways.
The budget requests $78 million for the Economic Research
Service--ERS--to provide for economic analyses on all aspects
of the agricultural enterprise, from scientific investments to
food access to agricultural trade. And within the ERS budget
request is a proposal for $2.5 million for research innovations
to improve policy effectiveness research and to strengthen
behavioral economics research in the statistical use of
administrative data.
For the National Agricultural Statistics Service, the
budget requests nearly $160 million that would enable the
agency to fully fund the Census of Agriculture and complete
that census sets of reports, as well as to reinstate several of
the surveys that have had to be suspended this year
attributable to sequestration and rescission.
Under the strong leadership of Secretary Vilsack, we are
continuing to leverage the appropriated funds that we have by
streamlining our business processes and identifying
efficiencies. Collectively the agencies appearing before you
have, for example, reduced our travel expenses by 52 percent
below the 2010 level.
So, Mr. Chairman, we look forward to answering whatever
questions you and members of the Committee may have, and we
look forward to working with you to continue to support a
world-class level of science and education at the Department of
Agriculture.
Mr. Aderholt. Thank you for your testimony.
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NIFA RESEARCH PROGRAMS
Mr. Aderholt. I know that since we will have several appear
that will be speaking, the microphones are one-directional, so
when you do speak, if you will just grab the microphone and
speak into the microphone so that the reporter can make sure
that they hear what you are saying as they take down the
dictation.
Let me start out by mentioning, as it was alluded to
earlier, Dr. Ramaswamy, the fiscal year 2013 House Committee
report and the statement of managers accompanying the
conference agreement directed the NIFA to include proposed
funding levels and expected publication dates, scope,
allocation level for each request for award for five research
programs, including the Ag and Food Research Initiative,
sustainable agricultural, organic, integrated and specialty
crops. A similar change was included in the House and Senate
versions on the farm bill. This is a very strong indication of
congressional intent, yet NIFA did not comply.
The question would be simply why was that not the case, and
why did they not comply with the directive?
Dr. Ramaswamy. Good morning, Chairman Aderholt.
Mr. Aderholt. If you want to move that over towards you a
little more.
Dr. Ramaswamy. Good morning, Chairman Aderholt. Thank you
very much for including us in this briefing on the hearing on
the budget.
In response to your question, indeed we submitted the
scope, and the RFAs were submitted with the explanatory notes,
and that includes all of the RFAs to be coming out, the scope,
the dates. That has been provided with the explanatory notes,
sir.
Mr. Aderholt. What about the other aspect of it? What is
the problem there?
Dr. Ramaswamy. Essentially in the explanatory notes we have
provided, so we have got the AFRI funding levels, the SARE
funding levels, they are all in there. And, as you know, the
mandatory programs that included the Specialty Crop Research
Initiative, the Organic Research and Extension Initiative and
the Biomass Research and Development Initiative are not
included because the farm bill expired, and we do not have
funding, we do not have authorization for it. So the
explanatory notes are restricted to AFRI and SARE funding.
Mr. Aderholt. So when do you think that you can get this
information to us?
Dr. Ramaswamy. So the explanatory notes are available
already. Maybe I should seek Mr. Young's comment on this, the
explanatory notes. They were submitted on Monday?
Mr. Young. The day the budget came out, yes, sir.
Dr. Ramaswamy. Yes, the day the budget came out then.
Mr. Aderholt. Of course, the Subcommittee had directed last
year, and, of course, that was before I took over as chairman
of the Subcommittee, but my understanding was that there was a
request for that, and that was not met, and that is where the
concern is. We would like to maybe get that as soon as possible
to clarify the question on the information that we would like
on that. So we will be getting back with you to clarify that as
we move forward.
Dr. Ramaswamy. We will, sir.
INSULAR AREA FACILITIES AND EQUIPMENT
Mr. Aderholt. The fiscal year 2013 committee report
directed the National Institute of Food and Ag to review the
state of facilities and equipment for the insular areas and
report to the committee by January of 2013 with its findings
and recommendations. The Committee does not ask for this type
of information without reason. We need it to form our funding
and allocation decisions. What is the status of the report, and
when will we receive it?
Dr. Ramaswamy. So the report has been completed, and we
went through----
Mr. Aderholt. It has been completed?
Dr. Ramaswamy. Yes, sir. We had staff that went, actually
visited some of these insular areas. The report has been
completed, and it is under departmental review process. The
agency itself has completed it, but the department is reviewing
it right now, sir.
Mr. Aderholt. And can you tell us anything about the state
of the facilities in the insular areas?
Dr. Ramaswamy. Yes. The bottom line is that there are two
recommendations that we are making. The first of the
recommendations is indeed the facilities, the research
facilities, need very significant updates, and new facilities
need to be built as well in those areas. And this is across the
board in all of the insular areas, and the report itself will
contain additional information in there. But the bottom line is
they are desperately in need of very significant improvements
in their research facilities, and indeed for education as well,
their teaching facilities as well.
The second challenge that we have got is often times these
facilities, we need to make sure that we have clear title, that
the institutions have clear title, so that if we were to invest
dollars out there, and if new facilities are constructed, that
the institutions will have clear title as well because of the
ownership issues that we have got.
Mr. Aderholt. That is some of the recommendations that will
be forwarded?
Dr. Ramaswamy. Yes, sir.
Mr. Aderholt. I see my time is up. Let me recognize Mr.
Farr.
ARS CAPITAL INVESTMENT STRATEGY
Mr. Farr. Thank you, Mr. Chairman.
The report that you have identified 21 capital investment--
you have a capital investment strategy, and that 21 facilities
of ARS need upgrading improvement. I know I am on one of those.
What is the budget for those 21? The only one you put in this
budget is the chicken research facility.
Dr. Woteki. Correct, Mr. Farr. The Agricultural Research
Service estimates that for that first tranche of capital
improvements, it would require in the range of $100- to $150
million annually to complete those replacements or upgrades of
facilities.
Mr. Farr. For all 21?
Dr. Woteki. Yes.
Mr. Farr. You have done something different with the
chicken research facility. You put it all in there. Normally in
the past it has been Congress appropriates little by little,
and then you have to wait years to accumulate the total amount
and then spend it. I mean, I think the idea of getting it built
is a smart thing, but if you are doing $150 million a year,
does that mean all those problems would be addressed? How long
would it take? How many years?
Dr. Woteki. Well, I think first it is good to point out
that for a laboratory system of the size of the Agricultural
Research Service, that our buildings and facilities are a
continuous project. And you are correct that this year the
approach that we have taken for the poultry research lab
replacement is a one-time----
Mr. Farr. I understand that. The question is----
Dr. Woteki [continuing]. Which is different from the
approach we have taken in the past.
Mr. Farr. So how long would it take you at $150; you
haven't asked for the $150 million, so----
Dr. Woteki. The years beyond?
Mr. Farr. Yes.
Dr. Woteki. Well, we are going to begin preparing the
outyears budgets, and we will continue to include requests for
infrastructure replacement and renewal for ARS.
Mr. Farr. So I guess the question is would that $150
million take care of the 21 priority capital investment
strategy list, or do you need more than $150 million?
Dr. Woteki. We need annually in the range of $100- to $150
million in order to complete our first tranche----
Mr. Farr. How many could you complete with $150 million of
the 21?
Dr. Woteki. Well, each project is going to be of varying
size and scale, and I would like to ask if Dr. Knipling can
provide you with some additional information on the plans for
the outyears beyond 2014.
Mr. Farr. Yes. I am glad you have gone through the system.
I think it is smart. The military uses that, and we suggested
that you develop a priority strategy for capital outlays. It
has always just been done by earmarks. This is now based on
merit. The question is now you have prioritized 21 facilities
that need attention in addition to some that you are closing.
If you are going to propose now that Congress appropriate
or put into the capital fund $150 million a year, how many of
those 21 can you rebuild or upgrade or whatever the plans are
for them with $150 million? How far down the list can you get?
Dr. Knipling. This year, as has been pointed out, $155
million for the priority number one facility. Of course, we
will have to wait year by year to see what the President's
budget will be, but it was our intent and the recommendation of
the Capital Investment Strategy Report that we seek a line item
so we can systematically year after year----
Mr. Farr. I know all that. Just tell me how long.
Dr. Knipling. The 21 top priority facilities, that is the
lowest-condition facilities in need of modernization that are
also housing our highest-priority facilities, we have sequenced
those over a period of 9 years or nine funding increments at
roughly $100 to $150 million apiece. As we move through that
queue list, other facilities in the priorities would move up in
the queue list. We see this as an ongoing, somewhat forever
process to modernize our facilities in a systematic manner on
about a 40-year cycle.
Mr. Farr. So is it going to be your proposal to, as you are
doing with the facilities, just put all the money into one
facility a year?
Dr. Knipling. In some cases, lower-cost facilities, we
might do two, three or four per year. For example, the report
does call for one facility this first year; the second year,
two facilities; the third year, I think there are three
facilities. It depends on the facility itself and the scope and
the cost of modernization.
Mr. Farr. I just want to know if I am going to live long
enough to see the Salinas facility, which was a Quonset hut
built in 1941; can't even get the researchers because the
conditions are so bad, can't get the equipment because you
can't house it in the buildings that can't be heated and cooled
and all the things that high-tech equipment needed to be, in
the middle of the richest agricultural center in the world.
Dr. Knipling. The Salinas facility is on that priority
list. I believe it is in the fourth cohort of that 21 list.
Mr. Farr. I hope I am alive.
All right, thank you, Mr. Chairman. My time is up.
IMMIGRATION POLICY AND FARM LABOR
Mr. Aderholt. Mr. Valadao.
Mr. Valadao. Thank you, Mr. Chair.
In the USDA's 2012 report on the potential impacts of
changes in immigration policy on U.S. agriculture and the
market for hired farm labor, a hypothetical increase in the
supply of temporary nonimmigrant, foreign-born farm workers
would lead to an industrywide increase in total output and
exports. There were more substantial increases with more labor-
intensive sectors, such as fruits, tree nuts, vegetables and
nursery products. These findings were based on a 156,000-person
increase over the 15 years and the employment of temporary
nonimmigrant agricultural workers, such as the current--those
currently in the H-2A program.
Your model was based upon the base year number of 48,336
workers in H-2A from 2005. This simulated event would indicate
a significant increase in H-2A equivalent visas, yet still far
below the total number of foreign-born agricultural workers. If
we continue to grow the supply of legal temporary workers past
the 156,000 number to match closer to that actual demand for
all agriculture workers, would we continue to see these
increases in agricultural output?
Dr. Bohman. Thank you.
You are referring to a study conducted by the Economic
Research Service, and your report jives with what my
understanding of the study is, that an increase in temporary
workers has a benefit to all U.S. agriculture, and especially
labor-intensive products. And it does use the model of the U.S.
economy, and all models become less and less reliable as you
push out further and further beyond the existing reality. But I
believe it is a robust result that labor shortages
disproportionately have negative impacts on labor-intensive
products. It is kind of common sense. The model confirms that
and quantifies the effects, and it would find similar results
as you expanded the number of workers. But I would put a caveat
that, as with any model, the further you get from the current
status, you have to take into account decreasing reliability.
Mr. Valadao. One more. In that same 2012 report, the USDA
also simulated a decrease in the unauthorized labor supply.
This would have been caused by some sort of unspecified policy
implemented, which basically means some sort of immigration
reform that would directly affect farm workers. In the
simulation, a 34.1 percent reduction in employment of
unauthorized workers, the USDA found a 3.7 to 4 percent
increase in the employment of U.S.-born and foreign-born
workers, foreign-born permanent resident workers.
Besides many of them staying at their current employers,
where would the rest of the now authorized labor be heading
according to your predictions? Would we expect an exodus from
farm labor? If so, how many?
Dr. Bohman. Yes. So in the second scenario in our research,
we looked at a simulated decrease in unauthorized labor across
the entire U.S. economy, and there were impacts, as you
describe, on the agricultural sector, especially on labor-
intensive products that saw a loss in their labor supply, a
decrease in production and exports.
What happens to the overall labor is that you see some
increases in wages where you have a shortage, but you also see
a restructuring of the economy. As there is a loss of these
unskilled workers, there is an overall movement downwards on
the skill level of the U.S. labor force such that on balance
you see a small decrease in total U.S. gross national product
or income because those effects outweigh any increases in wages
for the group of people who move into those jobs.
Mr. Valadao. Thank you.
Mr. Aderholt. Ms. Pingree.
LOCAL FOODS
Ms. Pingree. Thank you all for your presence, and your work
and your testimony this morning. I appreciate the work you do
for farmers and for the USDA.
My first question is about the USDA's fiscal year 2014
budget. I see it calls for a request in increase in the funding
for AFRI, Agriculture and Food Research Initiative, to $383
million, an increase of $117 million above fiscal year 2013,
which I think is a good thing in the budget.
One of the target areas that the funding would be used for
is nutrition and health, specifically in developing and
increasing the consumption of healthy foods. Since I am of the
belief that local foods by nature give people the opportunity
to have healthier food than other processed foods, and
vegetable, fruit and nut farms account for about 65 percent of
local food sales, does the Department have any plans to help
support local food sales? Should Congress go ahead with the
increase in funding? And are you planning to conduct any
further research on the various aspects of local food systems?
Dr. Woteki. Let me initially respond to your question,
Congresswoman. Through the AFRI program we have been providing
competitive grant support. As you indicate, we are asking for
increases in nutrition and health, and that increasing--the
purpose of these research programs is to provide the evidence
base for program decisions and for policy decisions.
We support research that goes to improve a farmer's ability
to produce fruits and vegetables, nuts, other health-promoting
foods and the local markets for them through a variety of
different mechanisms that include actually all of the agencies
that are reflected here, from the statistics that the National
Agricultural Statistics Service develops, through the kind of
economic analyses that ERS has done on local markets and
farmers' desirability to enter into the kind of production that
it is going to provide for those local markets for them.
AFRI is a way that competitive grants are provided. There
are also formula funds that go to support the State
agricultural experiment stations and the extension services
that have also played a role in providing the research base as
well as the education for farmers desiring to get into these
types of production operations. And ARS, through its laboratory
infrastructure, also provides for some long-term infrastructure
and long-term research that is supporting fruit and vegetable
production.
So, in essence, all four of the agencies in the mission
area have been playing a role in providing the background
evidence base for programs and policies in support of local
foods.
Ms. Pingree. I appreciate your answer and appreciate that
that has already been part of your work. Would you anticipate
if there is increased funding, you will be able to see more of
the same here?
Dr. Woteki. Yes.
Ms. Pingree. Great.
Dr. Clark. If I could add, there are questions on the
Census of Agriculture relating to producers who sell to local
markets, and if there is funding in the future, we would be
able to target that population and do a follow-on survey to the
census of agriculture.
Ms. Pingree. So you are currently asking those questions is
what you are saying?
Dr. Clark. Yes, the questions are on the survey.
LOCALLY ADAPTED SEEDS
Ms. Pingree. Great. Great.
One other quick question, I don't have a lot of time, but I
am actually concerned about farmers' dwindling options for
locally adapted seeds. I also am of the belief that for
agriculture to be successful in the long term, farmers need
access to seeds that are adapted to local climate and pest
conditions, and I think all of you know scientifically there
are climatic changing conditions and pest challenges that are
constantly changing.
The 2008 farm bill required USDA to make conventional plant
and animal breeding a priority within the AFRI program. Can you
talk a little bit about what the USDA is doing to promote
breeding programs for locally adapted seeds and public
cultivars, and also whether or not you intend to include an
AFRI subprogram for this purpose in the 2014 AFRI request for
applications?
Dr. Woteki. Again, there are two agencies that are
involved, the intramural program administered through the
Agricultural Research Service that provides germplasm
collections that are very important for plant breeding and to
achieve, as you very well described, locally adapted seeds. So
that ongoing germplasm preservation activities and providing
germplasm to researchers and breeders is an important role for
ARS.
Again, through the programs that the National Institute of
Food and Agriculture administers, competitive grants as well as
the formula funds that go to the State agricultural experiment
stations both play a role in providing funding for conventional
plant breeding as well as for plant breeders that are using the
new genetic technologies as well.
Ms. Pingree. Great.
Dr. Ramaswamy. If I might add just a bit more. So within
the National Institute of Food and Agriculture, over the last 4
years we have provided well over $50 million in support of
conventional plant breeding, and very specifically, for actual
development of cultivars and germplasm and others, we have
provided approximately $20 million. The other amount is for
developing technologies and methods that are needed as well to
help enable that.
Then for the 2013 fiscal year that we have got, we have an
RFA, request for application, that is out that is allocating $5
million for conventional plant breeding. And as we go forward
in 2014, we expect to allocate similar amounts of money for
plant breeding as well. We are very concerned, like you are,
about this effort.
Ms. Pingree. Great.
Thank you, Mr. Chairman. I have gone over my time. I
appreciate it.
Mr. Aderholt. Mr. Rooney.
SEQUESTRATION IMPACT
Mr. Rooney. Thank you, Mr. Chairman.
On March 11th, NIFA released a statement regarding the
impact of the sequester. In it, you stated that there would be
a potential reduction of $13 million for AFRI competitive
grants, reductions around $37 million for capacity formula
funding, and reductions of over $10 million for other research,
education and extension programs.
In the continuing resolution, funding for AFRI was
increased by $10 million, but as a discretionary program AFRI
is still subject to the USDA's 2.5 percent reduction within the
next 6 months. As you know, programs for research at land-grant
universities like the University of Florida will be funded,
although those will be cut by 7.61 percent.
My first question is can you provide examples of how the
sequester has negatively impacted AFRI research initiatives,
specifically at land-grant institutions like the University of
Florida?
Mr. Bishop. Will the gentleman yield?
Mr. Rooney. Yes, sir, I yield.
Mr. Bishop. Let me add something to his question. Would you
also include the 1890 colleges and universities--I think Mr.
Chairman has one in his district, Mr. Nunnelee has one in his
district, and I have one, of course, in Georgia--the impact of
sequestration on those who have traditionally been undercut
when it came to resources.
Dr. Ramaswamy. Congressman Bishop, I appreciate that add-
on, and, Congressman Rooney, in response to your question,
indeed the sequester is going to have a very significant
impact. Within the AFRI program with the reduction that we are
looking at, we think that we are going to be unable to provide
funding for about 100 new grant proposals.
In addition to the sequester that you referred to, the
other thing that happened was the mandatory programs were also
lost, and that was about $130 million for specialty crops, for
organic, and biomass development, and beginning farmers and
ranchers development. So between the two, the loss due to the
sequester as well as the loss of the mandatory programs, we
project out that we are not going to be able to do about 200
grant proposals.
To give you an example, one of those programs that we have
lost in the mandatory programs is the Specialty Crop Research
Initiative. Last year the University of Florida was awarded a
grant for approximately $9 million on Huanglongbing, the citrus
greening challenge that we have got that particularly Florida
is facing a very significant challenge with that particular
organism. So I imagine that we are not going to be able to do
that kind of research.
And coming specifically to institutions like Fort Valley
State and Alcorn State University and others, again, their
competitiveness is going to be reduced as well, because the
funding rate, depending on what panel that you are in, what
area of endeavor that you are submitting grant proposals to,
ranges between about 6 percent and about 22 percent. So with
the fewer dollars that we have got, the competition is going to
be significantly keener. So that is going to certainly have
ramifications.
Mr. Rooney. Obviously that is horrible news with regard to
the greening issue as far as my district is concerned and my
alma mater.
But just one follow-up. If Congress, if we fail to pass the
USDA budget for 2014, how will this impact NIFA's and in
particular how will it impact AFRI?
Dr. Ramaswamy. Oh, wow. If the budget for NIFA, USDA and
NIFA, is not passed, that is approximately $1.29 billion. AFRI
itself is proposed for $383 million, and $383 million, in our
estimate, is very simply approximately about 1,000 grant
proposals we will not be able to do, anywhere between 500 and
1,000 grant proposals we will not be able to do in the
competitive grants arena.
Then if you go to the capacity funding that is distributed
by formula for the experiment stations to undertake research
and extension to translate that knowledge and deliver it to the
end users, that is going to be a loss of--together in all the
capacity areas, that is a loss of well over $700 million. And
that is going to have a huge impact on the 1890s, the 1862s,
the 1994s, the Hispanic-serving institutions, the non-land-
grant agricultural colleges. We are going to lose capacity. And
research in many ways you can't stop and start again, because
there is a lot of development work that goes on, and that would
be a very, very significant impact on America's global
preeminence in the food and agricultural enterprise, and God
forbid that something like that happens.
Mr. Rooney. Thank you.
Thank you, Mr. Chairman. I yield back.
Mr. Aderholt. Mr. Bishop.
NATIONAL AGRICULTURAL STATISTICS SERVICE
Mr. Bishop. Thank you very much. Let me welcome all of you,
and I apologize for my delinquency. I had another conflict.
But one of the casualties of sequestration appears to be
the National Agricultural Statistics Service plan to suspend
pecan production estimates and forecasts effective immediately,
and, of course, I am concerned about that. The entire pecan
industry relies heavily on these reports as well as the monthly
cold storage report, which we understand will continue.
Unlike other U.S. tree and nut crops, pecans are grown
across a wide swath of 15 States, and the industry is segmented
and has not been successful in establishing a marketing order.
Therefore, the industry has very limited means to determine the
size of the crop in any given year, and the numbers that are
provided by NASS are critical to the pecan industry's ability
to operate in an extremely volatile marketplace, both
domestically and internationally.
Can you have your staff review options such that possibly
those pecan reports might be reinstated?
Dr. Woteki. Congressman Bishop, we share your concerns
about NASS having to suspend a number of surveys and the
reports that come from them during this year, 2013, because of
the sequestration and the additional rescission. The agency has
very limited options in the way that they can absorb this very
significant cut coming at halfway through the fiscal year.
The one point that I think is very important is that the
2014 budget request would allow NASS to reinstate the surveys
that are the basis for the pecan report as well as a number of
others that have had to be suspended this year because of the
sequestration.
GENOME RESEARCH
Mr. Bishop. Thank you very much for that, but it is really
going to have a devastating impact on the industry this year
because they don't have any way of tracking what the market is
going to be.
Do you have a sense of how many major commodities still
exist where we have not completed genome research or
established a genome? What ARS resources are going to be
dedicated to genetic research in fiscal year 2014, in
particularly peanuts? Both the University of Georgia and the
University of Florida have been working on peanut genome
research for some time, and, of course, the cuts are going to
impact that. Can you speak to that quickly?
Dr. Woteki. Well, we have had a partnership with a number
of Federal science agencies to support the genome sequencing
and assembly for major crops and livestock species, and we have
also initiated some additional genome initiatives to sequence
the major pest species as well as major diseases as well.
Dr. Knipling, are you familiar with where we are on the
major commodities?
Dr. Knipling. In the case of food animals, livestock, there
are five major species, but when it comes to crops, there are
literally hundreds of species. But we are systematically
sequencing the genome of the major crop species.
Mr. Bishop. I am particularly interested in peanuts.
Dr. Knipling. I don't know particularly about peanuts. I
will provide that for the record. But I would say this is a
major initiative across the whole spectrum of crop production.
[The information follows:]
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1890S AND HISTORICALLY BLACK COLLEGES AND UNIVERSITIES
Mr. Bishop. Thank you.
Let me just return to the issue of the 1890s and the HBCUs.
Can I get you to, for the record, and you probably don't have
that information handy at the moment, but out of all of the
competitive nonformula research grants provided by NIFA, how
many grants were awarded to 1890 universities, and what
percentage of the total funding did that represent? Over the
last, I would suggest, 5 years, were there any HBCUs awarded
nonformula competitive NIFA grants? Are there any examples of
current ongoing collaborative research projects between 1890s
and 1862s?
If there have been competitive grants awarded, I surmise
that it has been minimal, and I have a continuing concern that
the 1890 universities--as to why the 1890s have not been able
to enjoy the same kind of wealth of resources from research
that the 1860s have been able to enjoy.
And, of course, I obviously am interested in Fort Valley
State University in Georgia. And, of course, I hail from
Alabama, and there is Tuskegee, Alabama A&M, there is Florida
A&M, there is Alcorn A&M, Mississippi. And I notice that the
Evans-Allen program for the 1890 institutions was supposed to
be funded at the fiscal year 2011 level of $50.9 million, and
that has actually been flat every year since fiscal year 2011.
Shouldn't this program be spared from sequestration?
Dr. Woteki. Let me very briefly say we would be happy to
provide for the record information on the competitive funding
that has been provided to the colleges of 1890, either as
individual faculty members as well as those that are ones in
which there have been multiple faculty from multiple
institutions that have been successful in the competitive
grants program.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
SEQUESTRATION IMPACT
Dr. Woteki. And with respect to the sequestration, our
flexibility in deciding how to apply those cuts was essentially
lacking. We have very little flexibility in how we can take
those cuts because they are applied across each line within the
budget. So in the case of the National Institute of Food and
Agriculture with many, many line items in the budget, each one
of them was affected across the board in the same manner.
Mr. Bishop. You did it proportionately?
Dr. Woteki. They include the same 5.1 percent for the
sequester and the 2.7 percent for the rescission, yes.
REE ACTION PLAN
Mr. Aderholt. Thank you.
Dr. Woteki, last year you released the Research, Education,
Economics Action Plan. This built upon the previous roadmap,
which USDA was required to develop by the 2008 farm bill. While
USDA has a very broad research mandate, neither Congress nor
USDA can fund every worthwhile or interesting project. I
support your efforts in trying to make a priority of the
certain research mission that you are tasked to do at USDA.
So could you tell us what are some of the USDA's most
recent research accomplishments, perhaps maybe the top four or
five?
Dr. Woteki. Well, thank you, Chairman Aderholt, for
recognizing how important the action plan has been to us, and
the work that we have done in developing that plan has helped
very much in sharpening up our priorities, and has helped us in
building the budget requests that we have submitted as part of
the President's 2014 budget.
We are finishing up the first annual report from the action
plan, and we will be happy to sit down with you and members of
the Committee to review that when we get the final department
approval for release, which we are expecting in the next month
or so.
The research accomplishments are in five major areas that
address the five major priority areas in the Secretary's
strategic plan and that relate to, first of all, food security
for production of agriculture here in the U.S. as well as
contributions globally; improving food safety; human nutrition,
with a major emphasis on obesity prevention; the fourth area in
biofuels and bioproducts; and the fifth area in adaptation and
mitigation of climate change.
So the report that we are putting together is providing
highlights of specific accomplishments of just 1 year of
operation under the action plan. And, as I said, we will be
happy to sit down and talk it through with you. It includes
data about the publications as well as patents and licensing
agreements in each of the priority research areas. It also
includes very specific examples of research accomplishments for
each of the goals and subobjectives. So there is quite a bit of
depth and detail that are associated with it.
Mr. Aderholt. Were you going to say something?
Dr. Ramaswamy. I will give you one quick example. Just in
the State of Alabama, one of the impactful research
accomplishments is in the area of precision agriculture. So
Auburn University and Tuskegee University, partnered with
Alabama A&M University as well, and other institutions, the
University of Georgia, for example, have developed a precision
agriculture approach that is saving in pesticide use, in the
amount of fertilizer applied, and the labor that is involved as
well. And we are estimating that just for the State of Alabama,
it is going to be a savings of about $20 million-plus as a
result of that research enterprise, the discoveries that have
been made. That has been translated and then delivered to the
end user. So there is that continuum of the research to the
discovery to the delivery process that we support.
Mr. Aderholt. That is a good example. I have actually been
able to see that firsthand, and it is very impressive.
Dr. Woteki, any other example that you could share with us?
Dr. Woteki. Oh, the problem is trying to decide what are
just a few of the top ones. We have had over this past year
publications on the genome sequencing as it relates to wheat.
That is a major step forward as part of an international
research activity. That has included ARS as well as university-
based researchers.
We have had the production for the first time of a foot and
mouth disease vaccine that is the result of ARS research. That
is the first time that a vaccine for foot and mouth disease can
be produced in the United States because it does not include
the live or attenuated organism, but rather is based on genetic
technologies that use only a part of the organism.
So there are a number of international efforts in
understanding climate change as it relates to agricultural
greenhouse gas production and ways that we can mitigate those
agricultural greenhouse gas production. So there is a wide
variety of research accomplishments.
Mr. Aderholt. Thank you very much. My time is up.
Mr. Farr.
Mr. Farr. Thank you very much, Mr. Chairman.
I was just noticing, I have been at this Committee for a
number of years. I don't think we have ever had a table where
everybody held a doctorate. This is the smartest group of
witnesses we have ever had. The problem is Mr. Young is at
every single table, and he is the only one up there without a
doctorate. So, Mr. Chairman, I think we ought to honor him
today with an honorary doctorate in fiscal policy wonk.
Mr. Aderholt. That will be considered.
Mr. Farr. We will get him up there as a coequal to his
peers.
Thank you for your talent, and thank you for your service
to the United States Government. We really appreciate it.
METHYL BROMIDE
Look, I came to Congress and, I think, in public life
trying to push the envelope, and it seems to me that you gather
all the data of how we ought to be pushing the envelope to
change. But I have some real issues. ARS, for example, Mr.
Knipling, the crop protection, you have $16 million allocated
this year for soil microbial ecology. I mean, since I have been
in Congress, we have spent $150 million trying to figure out
the alternatives to methyl bromide, and we haven't found
anything yet that works and can get accepted. I mean, the
methyl iodide couldn't pass California muster, and our
farmers--because I have probably one of the biggest users of
the strawberry industry for methyl bromide.
Can we get a better bang for our buck? I mean, I am just
frustrated. You know, our enemies have been able to invent
nuclear bombs faster than we can find an alternative to methyl
bromide.
Dr. Knipling. We indeed share those concerns, Mr. Farr. We
have both a science issue and opportunity as well as a
regulatory issue, as you know, with methyl bromide.
Mr. Farr. We all signed those agreements 20 years ago. I
point out that we have signed these protocols. That is when we
started putting money into finding an alternative. Why have we
been so ineffective in finding something that works?
Dr. Knipling. Methyl bromide, of course, was a very good
technology, and the alternatives in terms of other chemical
fumigants have had their--as you alluded to, had their
regulatory or efficacy issues as well. In fact, some of the
alternatives that have been developed are no longer available
because of regulatory concerns at either the State or Federal
level.
Mr. Farr. Well, that is the point. You are inventing things
and finding things that can't be used. That doesn't help the
farmer.
Dr. Knipling. The alternative approach to chemical
fumigants are some of the natural controls, the soil biology,
the soil health, the plant health. And so some of these
traditional methods that----
Mr. Farr. Yeah, we have cut the organic research budget.
Dr. Knipling. This is not so much an organic issue per se,
but the genomics, the pest resistance through genetic
improvement and plant breeding, the sustainability of the
environment, the integrity of the environment in terms of soil
health, soil biology, these are the alternatives that we are
working on, and that is the route we are going to need to go
because of the regulatory loss of methyl bromide and other
chemical fumigants.
Mr. Farr. Well, let us catch up to modern times and modern
farming practices. Where are you doing this research?
Dr. Knipling. Principally in California and Florida, but a
number of other States are contributing to it as well. But in
terms of genetic resistance, genetic resources, host plant
resistance, soil biology, it is a nationwide network, and much
of that, those basic discoveries, would have broad application
to other crop-production systems and areas regardless of where
the discoveries are made.
SUSTAINABLE AGRICULTURE/CLIMATE CHANGE
Mr. Farr. I understand you are also going to--you are
proposing $15.8 million for agricultural sustainability with
prioritizing sort of the weather effects, climate extremes, and
temperature, and precipitation rate and things like that. Where
are you going do to do that?
Dr. Knipling. That would be, again, across our network of
laboratories. This is a part of a broad strategy to develop
adaptations to changing climates. But, again, the approaches
are largely through crop production and animal production,
genetic improvement systems so that they can sustain their
capacity under a changing climate condition, changing water
conditions and----
Mr. Farr. Are you working with NOAA weather on that?
Dr. Knipling. Indirectly in terms of the data of climate,
but the science----
Mr. Farr. We have a major NOAA weather station in Monterey,
and we have an ag research station in Salinas right next to it.
This would be ideal. We have 85 crops that are looking for this
kind of information. It is the highest priority among the
ranchers there, because if they know dew points and things like
that, they don't have to apply as much herbicides, pesticides
or any other fertilizers. And so this is where you have another
Federal agency that is doing research.
Dr. Knipling. Yes, indeed. Actually another part of this
budget request that is different than the one we have been
talking about, but it actually is part of a USDA participation
in an earth sciences data network across all of the Federal
agencies. And again, our role, our niche within that USDA
perspective would be on-the-ground environmental data as it
relates to crop production and sustainability systems. But,
yes, we are connected with NOAA and the other Federal agencies
in that regard.
Mr. Farr. I hope you will look into finding a collaborative
between those two stations, because they have expressed
interest to me on the ground to work together. They just
haven't had anybody in Washington paying attention to it.
ORONO, MAINE, LAB
Mr. Aderholt. Ms. Pingree.
Ms. Pingree. Thank you, Mr. Chair.
You have already talked a little bit about some of the
challenges with ARS labs, and I just want to talk about the one
in Maine. So I was disappointed to see in the fiscal year 2014
budget proposal included the closure of the ARS plant and soil
lab at Orono, Maine, which is our land-grant college. The lab
has done exceptional work in fields like wild blueberries,
potato blight research that we don't think is duplicated
anywhere else in the country.
So I am just wondering if you can give me any additional
details about the proposal. Do you intend to continue to
utilize the facility at the University of Maine? Can you
clarify any of the details?
Dr. Knipling. Yes, I can address that. Yes, we have an ARS
federally owned laboratory on the campus of the University of
Maine. We do not plan to close that laboratory or reduce the
funding resources for it, but we do intend to and propose in
this budget to change the orientation and the use of that
facility to strengthen our North Atlantic salmon aquaculture
program. We have a facility on the coast at Franklin, Maine,
and the Orono facility would now be used as a companion
facility to that and a complement to focus on the fish health,
aquaculture health-related aspects of the program at Franklin.
So, no loss of resources, no loss of the facility, but a
new proposed use of the facility.
Ms. Pingree. I am sure there are always challenges and
change. Obviously there are still a lot of people interested in
the potato and blueberry industry who don't want to see the
change, although I also represent a tremendous number of people
interested in the aquaculture industry. So I appreciate the
fact that you are thinking broadly and thinking of ways to be
able to keep the facility working.
Dr. Knipling. I would just add that we have significant
blueberry and potato research investments at other places,
including in the Northeast, and much of that research and much
of what we do at one place does have some broad applicability
to other production areas.
Ms. Pingree. I certainly won't argue with you, because I am
just glad to see that you are working on possible ways to
utilize the facility and infrastructure, but nobody else grows
wild blueberries. I think that is really very unique to Maine
and a growing industry.
So there are some differences, but I do appreciate that you
are--and, of course, Maine potatoes are better than anyone
else's potatoes. But that is a matter for another day.
Mr. Farr. Do wild blueberries go with wild salmon?
LOCALLY ADAPTED SEEDS
Ms. Pingree. Well, that is a whole different Committee.
Bringing back the wild salmon has nothing to do with the
aquaculture salmon. But luckily I am on both, so I get to
discuss it in Fish and Wildlife as well.
I just want to go back and clarify this a little bit, nit-
picky, but I am sure I don't have a lot of time on this
question round. But we were talking before about the AFRI
program and the locally adapted seeds. And I guess I was trying
to specifically say whether you had any plans to include an
AFRI subprogram in the 2014 request for applications, because I
do understand, to the extent that much of this is somewhat new
to me even though I was on the Ag Committee before, but now
drilling down a little, I know that in the request for
applications, you know, what you state is more likely going to
be related to what proposals come to you.
Dr. Ramaswamy. Congresswoman Pingree, yes, indeed, we will.
In the 2014 RFAs that we are planning on, and hopefully with
your help, we will be able to get the funding that we need as
well to address these very challenging questions that need to
be addressed.
And specifically we have what are called challenge areas
and foundational areas within the AFRI program, and within the
foundational area we will specifically have RFA that will be on
plant breeding, conventional plant breeding, a very specific
RFA. We still don't know how much money is going to be
allocated to it. You know, it depends, again, on what you all
are going to be doing.
And as I said in the 2014 RFAs, we have indeed provided a
specific RFA for plant breeding, and that has been allocated $5
million.
In addition to that, in the challenge areas, you know,
which are about, you know, adapting to climate change and
developing better, more healthy foods and things of that
nature, there is opportunity for conventional plant breeding,
classical plant breeding, to be incorporated in that as well,
and we have got a number of projects that we have provided
funding for over the last few years specifically in the area of
using those conventional plant-breeding methods.
Ms. Pingree. Great. Thank you for your clarification.
Thank you, Mr. Chair.
Mr. Aderholt. Mr. Fortenberry.
Mr. Fortenberry. Thank you, Mr. Chairman.
Good morning, everyone. Thank you so much for joining us.
Dr. Ramaswamy, I understand you are a Cornhusker.
Dr. Ramaswamy. Sorry, I am a Wildcat.
Mr. Fortenberry. Did you spend some time at the University
of Nebraska though?
Dr. Ramaswamy. No, I was at K State, but I spent a lot of
time in Nebraska chasing bugs.
Mr. Fortenberry. That is the origin of the Bugeater mascot
from a long time ago.
Dr. Ramaswamy. You got it.
Mr. Fortenberry. Thank you all for coming this morning.
My grandfather was a county agent, and my mother was a 4-H
extension agent. My grandfather said that is the best job in
America. And if we think about, again, where our real economic
strength originates from in this country, you can definitively
point to the land-grant system as a major factor in taking
science and research and extending it into the hands of those
who are going to produce and grow food and all of the other
benefits that accrue from their production.
So with that said, I want you to know that I believe that
this is important, and it is a story that we have not told
aggressively enough to the rest of the Nation that really our
main, I think it is fair to say, backbone of economic strength
flows forth from our ability to produce off the land and
steward this important natural resource, and the traditional
way in which we have done that through partnerships with land-
grant institutions, through the USDA has been essential to that
whole process. But because so few people farm anymore directly
related to the land, I think the Nation has not heard that
story aggressively enough, and I think it is all of our
responsibility to tell it.
And I said this to the Secretary yesterday and actually
commended him for the job he does in trying to present in a
robust fashion the benefits of agriculture to the rest of the
Nation. That goes way beyond safe and abundant food, but is
also related clearly to economic policy, environmental policy
and conservation policy, even national security policy.
AGRICULTURE AND FOOD RESEARCH INITIATIVE
With that said, we have got in the budget here is $106
million increase for the Agriculture and Food Research
Initiative. And now why is that one elevated over others in
such an aggressive manner?
Dr. Ramaswamy. Thank you very much, Mr. Fortenberry, and I
couldn't agree with you more about the importance of the land-
grant enterprise that we have got in America. In fact, when
Abraham Lincoln signed the Morrill Act into law, he said--
allegedly he said that this is going to be the economic engine
for our Nation. And sure enough that has borne out to be true.
And only in America will we spend just a tad over 6 cents of
every dollar that we earn on food compared with Western Europe;
on average they spend over 10 to 15 cents of every dollar that
is earned. An unbelievable enterprise that was unleashed by the
land-grant institutions.
So I agree with you very much, and it is indeed a well-kept
secret. Most people don't understand it, don't know what it is
all about, and this is the 98-plus percent of the population
that doesn't get it. And we are two generations removed from
the farm in America, and so it becomes more and more important
for us to try to convey this message that we have got.
Specifically in response to your question about the
proposed increase, so there are three principles that we wanted
to adhere to, one of which was to increase funding for
competitive grants, and, as you stated, it has been proposed to
be increased by over $100 million.
The second thing that we wanted to do was to, in quotes,
``stem the flow,'' as it were, in loss of capacity in America.
And in the land-grant context, we have got the capacity funds
that are distributed based on formula for experiment stations,
Cooperative Extension Service. Your grandfather was a member of
that fantastic community. And so we wanted to make sure that we
could at least get to the 2012 level in maintaining the
capacity. And so that was the second principle.
The third principle was we wanted to make sure that our
minority-serving institutions were protected as well. And
indeed the proposed budget reflects that for the National
Institute of Food and Agriculture.
Within AFRI specifically, we wanted to focus at the core of
everything that we do, it is the farmers and ranchers. They
have got to be at the core of everything that we do. There are
a lot of externalities that impact them. There might be
insects, pathogens, weeds, climate change, greenhouse gases, on
and on and on; also the economic factors that we have got as
well. But at the core of it, it is that farmer and rancher, it
is about producing food, it is about putting food on the table.
That is what this budget is all about. And there is a
disconnect between what we invest in America and the complexity
of the challenges that we are trying to address as well. And so
the request for this increase in the Agriculture and Food
Research Initiative reflects that principle, that we want to
make sure that we are providing this knowledge that is
necessary that can be translated to innovations. Those
innovations create these solutions to the problems that we
face.
Mr. Fortenberry. I think the challenge here, and I think
you actually touched upon it, is to find that balance to ensure
that the institutions, land-grant institutions, can actually
have the capacity to absorb such a program in their
foundational activities. And I think that is the creative
tension, if you put it that way, if you want to put it that
way, that I hope you are looking for, clearly you are looking
for. All right. Thank you.
Dr. Ramaswamy. Yes, sir. Thank you very much.
Mr. Aderholt. Mr. Bishop.
PEST CONTROL
Mr. Bishop. Thank you very much.
While I recognize that the eradication of cotton insects
and pests is primarily the role of APHIS, I notice that NIFA
proposes to spend $11.9 million in fiscal year 2014 for
research projects focused on improved pest control.
While the APHIS Boll Weevil Eradication Program has
successfully eradicated the boll weevil from all U.S. Cotton
areas except for the extreme lower parts of Texas and the Lower
Rio Grande Valley bordering the Mexico, the Lower Rio Grande
Valley continues an active battle to eradicate the boll weevil,
and unfortunately that area serves as the only barrier between
boll weevils in Mexico and boll weevils coming into the United
States. Our southern cotton producers are very concerned that
if we don't get a handle on this situation in Mexico, that we
could ultimately see a reinfestation in the United States.
So what kinds of pest-control projects are you currently
funding? And do any of these projects include the study of
pests which potentially come across the border from other
countries, particularly Mexico? And, of course, primarily I am
interested in the boll weevil.
I had the opportunity at the Southeastern Farm Show in
Moultrie, Georgia, to preach the eulogy of the boll weevil
about 15 years ago. Everybody was very happy, but now we are
wondering if a resurrection is on the horizon.
Dr. Woteki. Let me kick off by saying we do maintain, both
in the intramural programs at ARS as well as the extramural
programs at NIFA, active research programs with respect to
invasive species, whether they are plants or insects, and the
identification of control strategies that can be implemented
over the short to medium term, as well as longer-term
biological control approaches that include the identification
of natural predators that are present in the countries and the
continents from which these invasive species originate prior to
their coming into this country, where there may not be any
natural predators.
Let me ask Dr. Knipling to talk about what ARS is planning
with respect to cotton and boll weevil research, and then Dr.
Ramaswamy on the integrated pest management proposals that are
included in the budget.
Dr. Knipling. Well, I would certainly acknowledge that
invasive species of all types are a very large portion of our
research portfolio.
There is a very interesting story with the cotton boll
weevil, and it literally goes back 50 years. Even though APHIS,
in cooperation with the grower organizations and the State
departments of agriculture, have been responsible for
implementing the Boll Weevil Eradication Program across the
entire Cotton Belt starting in Virginia and North Carolina and
working toward the Southwest. Virtually all of that operation
was based upon technology developed by scientists in the
Agricultural Research Service and the land-grant universities.
One of the key successes in that was development of the
boll weevil pheromone, that is the sex attractant, and that has
been used as the basis for trapping and monitoring, and that is
still used. The sterile insect technique was also deployed. It
turned out not to be as successful for that insect as it did
for others, but it was used in peripheral areas where the boll
weevil population was low, such as up into Tennessee, even
Kentucky, southern Illinois, as part of the eradication
program.
Understanding the biology of the boll weevil and its over-
wintering habits and the critical timing of the technology
including insecticide technologies, so it was a portfolio of
technologies that were all based upon science, and it was
deployed in a very orchestrated way across the entire Cotton
Belt.
We continue to have at College Station, Texas, a cotton
insect research program in support of the boll weevil program,
and I think we are on the threshold of achieving it.
As you point out, it is going to be very important to
maintain a barrier and a capacity in Mexico to keep it from
reinvading the United States. Incidentally, it is not a native
insect to the U.S.; it is native to Mexico and Central America.
But with other pest-management programs, we have had
collaborative arrangements with Mexico and other foreign
governments to establish programs that go into their country as
well. So that would be perhaps a next step beyond eradication
in Texas.
Dr. Ramaswamy. So I have also been to Enterprise, Alabama,
which is where the shrine to the boll weevil was established
many, many years ago. So if you all have not been there, you
might want to check it out. It is pretty cool.
Very specifically within NIFA, in addition to what Dr.
Woteki and Dr. Knipling said, we have got several different
lines that we are going to be providing funding. We have
consolidated all of the various programs that we had in the
plant protection, pest management area into basically two
lines. One of them is we call it crop protection, slash, pest
management, and over $20 million is going to be invested in
developing new methods, new technologies to deal with insects,
and weeds, and pathogens and things of that nature, including
the invasive species.
A second area that we have kept aside is--we have listened
to stakeholders--we have kept aside the IR-4 program, the Minor
Use Pesticides Program, and that is another area that is about
over $11 million that we are going to be investing--we propose
to invest in coming up with new technologies to deal with
pests.
The third area is in the other funding programs that we
have got: for example, earlier Congresswoman Pingree asked
about conventional plant breeding, the approaches that are
available to us in the plant-breeding domain of dealing with
insects, and pathogens and things of that nature is another
opportunity for us to develop new methods and new technologies
as well.
Finally, the Sustainable Agriculture Research and Education
program, SARE, has now been consolidated into one line. We had
under the research enterprise and the extension enterprise two
separate areas, and we have brought it all together. It is over
$22 million that we are proposing. And then within the SARE
program we will have great opportunities to develop new
technologies to deal with pests as well. So we are certainly
very concerned about this, sir.
Mr. Bishop. My time is expired, and I thank you.
Mr. Aderholt. Mr. Yoder.
WHEAT AND BARLEY SCAB INITIATIVE
Mr. Yoder. Thank you, Mr. Chairman. Thank you all for
coming today. I appreciate having you here.
Dr. Ramaswamy, I, for one, am pleased to hear of your
association with K State. I don't know how the rest of the
folks here were, but as a proud Kansan----
Dr. Ramaswamy. Being a Jayhawk yourself.
Mr. Yoder. Okay. You are familiar with that. Our sister
institution down the road there in Manhattan, we are proud of
them and their role in agriculture in the State, and they have
got some really exciting projects going there, and very pleased
with what they are up to.
Certainly as a Kansan, we know Kansas is the biggest wheat
producer in the country, and I wanted to ask a little bit about
the U.S. Wheat and Barley Scab Initiative. The 2013 budget for
ARS included $4.7 million for this, which, through a
competitive grant program, is providing funding to over 100
State university research projects in 22 States to address the
substantial economic threat to the U.S. wheat and barley crops
from the fungal disease.
As you know, the disease reduces crop yields and quality,
reducing returns to both growers and grain end users, with a
substantial negative impact to the job-generating wheat- and
barley-based agriculture economy. It also produces health-
threatening mycotoxins, which are a food safety hazard.
I noted in the budget that the budget was actually--that
the research is reduced by just under $1 million; I think
$880,000. So what is the status of the research, and why are we
reducing expenditures there?
Dr. Ramaswamy. So I am going to refer to my colleague Dr.
Knipling to respond to that, because it is being managed by the
Agricultural Research Service. But I will come back and respond
to your question as well, because we are doing several things
in that realm, in the scab area as well.
Mr. Yoder. Great. Thank you.
Dr. Knipling.
Dr. Knipling. Yes. The wheat scab is a fungal pathogen,
Fusarium. It also affects barley. It debilitates, reduces the
crop production, but it also leaves behind a toxin which has
some food safety, feed safety implications, and export and
marketing implications as well.
This problem really came to light in a big way in the
1990s. Since about the year 2000, ARS has been investing about
$10 million a year at various of our laboratories. About half
of that is in the intramural program, and the other half is
roughly the $5 million that you referred to as the cooperative
agreement, a program with universities.
We made tremendous progress over the last 12 to 13 years.
The problem is probably not more than--in terms of losses to
producers and to the marketplace, probably not more than 20
percent of what it was 15 years ago.
So under these budget circumstances, we are always
challenged to refocus our resources to higher priorities. We
are proposing to reduce the investment by about half. We will
still maintain about $5 million at our laboratories, but to
focus the other half on some of the priorities that we have
been talking about in this hearing, some of the other crop
production, sustainability, adaptation to climatic change,
variability and so forth. This work will still relate to wheat-
production systems, crop-production systems, but taking a
different approach. But we will maintain the base program of
about $5 million at our laboratories.
Dr. Ramaswamy. If I might add to that, I had one of my
colleagues do a quick search for me. At the land-grant
university community, the funding that we receive from ARS that
is provided to the land-grant universities, there are about 40
projects, almost 40 projects, that are attributable to scab
work. That is almost all of them are in collaboration with our
colleagues in the Agricultural Research Service as well. The
funding is provided with our capacity funds, the Hatch funds,
that provides funding for agricultural experiment stations, as
well as the Smith-Lever funds for Cooperative Extension Service
as well, so that the research is actually transmitted and
delivered to the end users.
In other areas within the Agriculture and Food Research
Initiative, we have provided funding for wheat researchers over
the last 4 years that is about improving wheat genetics, and
they have incorporated within those enterprises as well the
effort to deal with the scab, and other pathogens and insect
problems and wheat problems as well.
So we do have a tremendous presence in the scab and other
diseases. We have got this thing called the Karnal bunt disease
and Ug-99 coming from Uganda, you know, of tremendous concern
to us, going back to Congressman Bishop's question about
invasives, and we cannot take our eyes off this lest we are
unable to produce the food that we need to be producing for us
and for the world.
Mr. Yoder. Thank you.
Thank you, Mr. Chairman.
NUTRITION RESEARCH
Mr. Aderholt. Let me focus a little bit on the nutrition
research programs. USDA is responsible for human nutrition
research. This research is used to support programs and
functions, such as food assistance programs and dietary
guidelines. ERS, ARS and NIFA all fund programs on this topic.
Let me address to three of you, Dr. Knipling and Dr. Bohman
and Dr. Ramaswamy, maybe you could all each comment on this,
and, first of all, when you make your comments, the focus of
your particular agency on human nutrition, what questions you
are trying to answer, how is the information used by other
agencies and programs, and if there is any overlap?
So let us start with you, Dr. Bohman.
Dr. Bohman. Well, thanks.
The Economic Research Service has had a longstanding
program understanding the diets of American consumers. Our data
on food availability and what people eat extends back over 100
years.
A current focus is on the eating patterns of Americans, and
we have been vested with this committee and others' help in
funding in building a consumer data system. We are purchasing
data, such as scanner data from private suppliers, conducting
surveys, and integrating this with other data that is available
from the Federal system, such as the National Health and
Nutrition Examination Survey, or NHANES.
So from this work we are looking at what people eat; what
are the characteristics of the people who eat them, income,
demographics, where they live; and understanding the actual
pattern of American diets, as well as the cost of different
diets.
We published some research this year on the cost of healthy
food, which showed that it depends on how you measure it. By
calorie, less good food such as potato chips look cheap, but if
you measure by portion size, you find that an apple could be
thought of as cheaper than a bag of potato chips. It costs less
per portion size.
So this work is supporting the nutrition community, who use
this to interact with the people they work with, us, people who
eat the food, but also we work closely with CNPP, the Center
for Nutrition Policy and Promotion, who developed the dietary
guidelines, and they use the work that we do and the databases
we have in their work on dietary guidelines.
So I think it is well integrated. We have people who are on
their committees. We interact with them to make sure that the
work we do meshes with the kinds of recommendations that they
need to make. So I think it is a good case of collaboration
where we each have our different roles, but we are supporting
each other.
And then we also work closely with the Food and Nutrition
Service, and some of our work on nutrition there is to look at
the dietary outcomes or the health outcomes of people on the
major nutrition programs such as SNAP. We have ongoing work to
look at whether people who participate in SNAP eat healthier
diets than nonparticipants at the same levels of income.
We also work on the school lunch program and have been
working with FNS to jointly fund and develop research programs
that look at students' choices in the school lunch program and
how you can use relatively inexpensive techniques to change the
way those lunches are delivered, and improve the choices that
students make, and decrease the amount of waste. And that is
using behavioral economics, which is one of the things in the
2014 budget that we propose to increase with our initiative. We
meet quarterly with the Food and Nutrition Service to make sure
that what we are doing supports their programs.
Mr. Aderholt. Mr. Ramaswamy.
OBESITY PREVENTION
Dr. Ramaswamy. Yes, sir. Thanks very much.
And so the National Institute of Food and Agriculture, as
my colleague Dr. Bohman said, we participate in these
interagency conversations, collaborations and partnerships. So
in addition to the agencies within USDA, outside of USDA, we
also partner with the National Institutes of Health in looking
at the possibility of leveraging resources, both intellectual
and monetary resources.
Very specifically for 2014, in the nutrition area, our
focus, we are proposing over $35 million to be invested in this
enterprise. And our focus really is on preventing childhood
obesity, and we are focused specifically at the age group of 2
to 19 years of age. And the idea is to focus on basically three
things.
And so when you go back to issues related to obesity and
chronic diseases that we have got, it is the food, it is
behavior, it is lifestyle. These are the three things, along
with genetics, that contribute to the challenges that we have
got in chronic disease. So our focus is going to be on issues
related to behavioral, cultural issues, environmental factors
that impact this occurrence of childhood obesity and how do we
prevent that.
Within USDA basically, the idea is not just discover great
knowledge, publish it in some scientific journal, and pat
yourself on the back that you have done something great, but
you have got to take that knowledge, translate that, get those
innovations, and get those solutions to the problems that we
have got.
So within the funding program, we will have these--what we
call integrated research and extension and education grants
that we will be offering as well. Well over 50 percent in our
past experience has been well over 50 percent of these
integrated-type efforts that we have got. So there is a
continuity; the continuum between the discovery process and the
delivery process is going to be undertaken as well. That is a
very critical piece that we are working on.
The last thing that I wanted to share with you as well, we
have got this Expanded Food and Nutrition Education Program as
well, and that is approximately about $60 million-plus that we
will have as a result of the sequestration this year. And that
is targeted at a very large population, particularly
underrepresented populations. About 80 to 85 percent of the
participants in the EFNEP program are minority populations. And
again, we are working with them to help them develop better
knowledge so that they can incorporate.
And there are some really wonderful long-term studies have
been undertaken, for example, at the University of Wyoming.
Things that were done 5 years ago are now being looked at as a
follow-up in the form of a longitudinal study. And indeed, what
they are getting, the knowledge that they are getting, is
helping them develop better ways thinking about the food that
they are eating. And so there are some very interestingly good
data that are coming out of this as well. That is on the
ground.
Mr. Aderholt. Quickly, Dr. Knipling.
ARS NUTRITION CENTERS
Dr. Knipling. Yes, human nutrition is a very significant
part of ARS's research portfolio, approximately 10 percent of
our total program, and it is kind of a culmination of the food
chain. In fact, we operate a network of six major nutrition
centers around the country that focus on different aspects of
human nutrition, but all of which have a diet-health
relationship. We are increasingly relating this back to the
food-production system.
This budget actually proposes a $10 million enhancement of
the research programs at the six centers, and to focus on
strengthening the science basis for the other USDA food
assistance programs; to strengthen our nutrition monitoring
surveillance program, what is called ``What We Eat in
America'', and understanding the data associated with that so
that we can relate it to some of these other programs that my
colleagues have spoken about.
Mr. Aderholt. Mr. Farr.
NUTRITION INFORMATION
Mr. Farr. I want to make a comment on that. I mean, you
point out that a record level of obesity in Americans is
affecting heart disease, diabetes, cancer incidents, all
related to obesity. You certainly have the knowledge in knowing
what causes it, but I think you do a lousy job of trying to get
Americans to change our culture.
The fast-food industry grew up in my lifetime. The first
fast-food McDonald's, I think I was 26 before it was available.
It was kind of interesting to go down and buy a 19-cent
hamburger, but it wasn't something people would do every day.
The new generation have grown up with fast food. I think
the fast-food industrial complex is winning the war, and you
are losing it. I love that now you have the MyPlate available
in schools, but MyPlate ought to be in every fast-food
restaurant. They ought to show exactly what nutritional value
it is in what they are serving.
We have got to do something differently with the
information that you have, because if we are just going to try
to keep it in scientific circles, and it is not getting into
the lifestyle of people. I have tried, I am trying to lose 50
pounds, and I am not going on any diet. I am just going to try
to eat healthy foods. And I will tell you it is really hard.
You can't just go and get fresh stuff. And here in Washington,
you know, you have to go to one of these corner stores, it is
just not available. And until I got into this, I never realized
how difficult it is to eat healthy.
It is also the amount of portions that everybody gives you.
I have to take in a restaurant now and sort of scrape half the
plate away and say, I am not eating that, and then I have to
cut what I am going to eat in half.
I mean, it is a whole new learning process, and I am
dedicated to trying to figure this out, but I find that what we
have--all the information you have gathered and all the
information in the census you have, it is very difficult in
educating people and changing essentially our production, our
sales process. I mean, as I said yesterday to the Secretary, in
a country where Chicken McNugget is cheaper than a head of
lettuce, there is something wrong with all the processing that
you have to do to take a live animal and turn it into a Chicken
McNugget versus just cutting a head of lettuce and delivering
it to a place.
So if we are going to really fight this war on obesity, we
have got to ratchet up our game plan here. And I hope, Dr.
Woteki, that you--you point in your closing statement that you
proposed to have research capacities and build extensive new
partnerships and networks with other Federal, with State, and
with local agencies, with universities and with international
scientists. I don't have time, but I want to know what your
plan is to build that, because I think that all of these
entities work in such silos. I know at the State and local
level they are in silos. I want to bust those silos, and I want
to know what plan you are going to have to do that, and
particularly a plan for getting all this nutrition information
out so it is user-friendly in every place that people have to
make decisions about food.
So having said that, I want to ask some questions that
aren't even related to that.
Dr. Woteki. I have some answers related to that, though.
NATIONAL ARBORETUM
Mr. Farr. Wait a minute. I see that clock there is ticking.
So I want to know about our National Arboretum, one of my
favorite things. As you know, recently USDA published the newly
completed strategic plan for the U.S. National Arboretum. What
are the Department's plans for implementing this plan, which
emphasizes Arboretum's role in discovery, education and
accommodating over 1 million visitors a year? What are you
going to do to implement your study?
Dr. Woteki. Well, the strategic plan for the Arboretum has
been out for public comment, and it has gotten, from what I
have been told, a substantial amount of support from the
Friends of the National Arboretum.
The budget constraints that we are facing this fiscal year
are affecting every one of ARS's locations, including the
Arboretum. So with respect to the sequestration and the
rescission, this will result in a 7.8 percent cut to the
National Arboretum, which is going to have some ramifications
for them.
Mr. Farr. That is labor? Do we have to cut back because of
labor costs; big, high costs?
Dr. Woteki. Well, it is essentially a cut to all of the
operations, and each site that ARS has has a different
structure of labor as well as funds that are used to support
the research program, and also, at some sites, some funds that
are used to support research with collaborators and
universities.
The Arboretum does have very high proportionately labor-to-
program costs, and they have a number of decisions that they
are going to have to be making about how they are going to
absorb these cuts.
Mr. Farr. Do you speak with your colleagues, say, at the
University of Davis, where we have joint facilities, State
employees working with Federal employees, because the State of
California has gone through cutbacks and through furloughs and
been able to handle it. I mean, everybody was worried, and it
has had an effect, but I think Washington has been ignoring
that we have a major--government has been through years and
years of furloughs, and we can learn some lessons from them,
particularly in the research department. I don't know how they
handle all this, because you are right, you can't just drop
research and then start it up later.
But I hope that we can learn some lessons from your
colleagues in that area.
I have a couple of other questions, Mr. Chairman, but I
guess my time is up.
Mr. Aderholt. Mr. Fortenberry.
DROUGHT RESEARCH
Mr. Fortenberry. I don't want to be impolite if I cut any
of you off, but I want to get to three things, so I will try to
pack them. So if we could confine our conversations and move it
along quicker, that would help.
I want to talk about the drought. You all know the
circumstance where I live in Nebraska, and in many places
particularly in the Midwest. Is it time to institutionalize, if
you will, drought mitigation and research capacity? We are
doing this work, we have strung it along, but to formalize
structures in that regard, is this under consideration?
Dr. Woteki. I can say that referencing our action plan,
that the whole question of water, water availability, as well
as the development of adaptation and mitigation strategy is an
important subgoal within our research activities. It is
reflected, as well, in intramural and extramural research
programs to develop, for both crops and livestock, resilience
to drought conditions. So this is a priority for us, and it is
reflected in the action plan as well as in the research plans
of both ARS and NIFA.
Mr. Fortenberry. Well, we have spent about $15 billion of
payouts through crop insurance basically to mitigate the
effects on income, which is important and helpful. We have
advanced technologies in irrigation for proper stewardship of
water. But there is a point where you can only do so much to
mitigate the revenue damage to producers.
Driving through rural Nebraska the week before last, I was
straining my neck looking at at the level of the farm ponds,
and I was pleased to see that some water had been replenished
from the winter. But one of my producers in the area told me
that is just the water table, Jeff; there is still a ways to
go.
So hopefully we are a little bit better off this year just
in terms of the weather patterns thus far, but, again, getting
underneath this with a sustained research model that helps
mitigation, thank you for suggesting that is a priority.
NUTRITION INFORMATION
Let us move also to the nutrition side. We have got
obviously a growing awareness of the correlation between health
outcomes and nutrition. We all know that intuitively. We know
it by common sense. This has been a major priority of the
Department. But I think, again, we have lost some important
institutional dynamics that used to be ordinary.
For instance, it might sound anachronistic and old-
fashioned, but the whole concept of home economics as it was
integrated into school systems, taught with regularity, brought
into the home with regularity, and there is a lot of
sociological factors at work here that perhaps make it more of
a challenge, particularly with the fragmentation of family
life. Many kids have sedentary lifestyles. I mean, I used to
ride my bike home or walk home when it was warm. Neighborhoods
are such that perhaps you can't let children do that anymore. A
lot of children are on their own, unsupervised, they have to
stay inside. So all of these things are contributing to
lifestyle difficulties. But also, Congressman Farr has pointed
out some other dynamics in just what we eat, which become
simpler and easier.
So all of these factors go into these problematic outcomes.
But I think we ought to wave the flag here again and say, look,
we have got bodies of research, and in the past we have had
this well integrated into school systems that not only are
evident in the cafeteria, but actually are integrated into
children's education. Let us wave that flag again.
Dr. Woteki. To respond partially to your question and to
Mr. Farr's nonquestion about what are we doing with respect to
our research findings and the changing of the culture, I would
just like to make two major claims, and one is that the
research programs that Dr. Bohman, Dr. Ramaswamy and Dr.
Knipling described in human nutrition are very important in
establishing the evidence base for program and policy decisions
that the Department makes as well as that other departments
make. And a good examples of that is the research base that has
informed the new regulations on competitive foods that have
been proposed for the schools as well as for the school lunch
standard. So we can see where our research programs are having
applications in program and policy decisions.
The second point I want to make is that we have been
working over this past year with Under Secretary Kevin
Concannon, who is responsible for the food assistance programs
within the Department, and also with Dr. Howard Koh, the
Assistant Secretary for Health at the Department of Health and
Human Services, to establish an interagency----
Mr. Fortenberry. Just to break up the silos, as Sam Farr
said?
Dr. Woteki. Exactly, exactly. To coordinate our work on
human nutrition, both from the research perspective and from
the education perspective.
We are also participating with colleagues from the Centers
for Disease Control and with the National Institutes of Health,
along with the Robert Wood Johnson Foundation, a number of
leading academics in the national coordinating committee on
obesity research so that we are able to bring together all of
the agencies' expertise on this along with the research
community and the Robert Wood Johnson Foundation to examine
what is coming out of these various research programs, and how
can they also be used more effectively in policy development.
Mr. Fortenberry. Thank you, Mr. Chairman.
Mr. Aderholt. Ms. Pingree.
ANTIMICROBIAL RESISTANCE
Ms. Pingree. Thank you, Mr. Chair.
And I will go off in another direction, although it is all
interesting to me. I want to talk a little bit about
antibiotics and livestock and research around that. In 2011,
the GAO issued a report showing data collected by USDA and HHS
lacked crucial details necessary to examine the trends from
relationships between antibiotic use in food animals and drug-
resistant bacteria in animals and the growing problems with
that. Given the concerns about health and food safety and the
implications of antibiotic-resistant bacteria, funding for this
research is critical to fully evaluate the use of antibiotics
in food animal production.
I was encouraged to see that the President's budget
included funding to ARS to develop alternatives to antibiotics
to combat antibiotic resistance in livestock. Could you talk a
little bit more about the work? Is there coordination with the
FDA on the topic of the antibiotic resistance in general? And I
know some of the research is going on. And can you also talk a
little bit about the outreach to farmers and the public on
results and recommendations?
Dr. Woteki. We are also concerned about the emergence of
multidrug resistance--they are linked to food-borne pathogens--
and have, both in ARS as well as in NIFA budget, proposals that
would increase our funding available to address antimicrobial
resistance in food animals.
We do participate, to your second question, in the
Interagency Task Force on Antimicrobial Resistance, and that
task force has developed a public health action plan in which
our agencies are responsible for a number of actions that are
based on our research programs.
The Agricultural Research Service, as a case in point,
under this action plan is working to identify strategies for
minimizing microbial contamination of food. A lot of that
strategy has focused on carcass rinses that can be used in
poultry production, as well as carcass and hide rinses that can
be used to reduce the levels of food-borne pathogens in cattle
as they are presented for slaughter.
The ARS also evaluates the development, the persistence and
the transfer of antimicrobial-resistant organisms and the
resistance genes among those. This is kind of a fundamental
understanding that we are developing of how these traits are
passed from one organism to another. And ARS also does some
very important research that is focusing on the sampling
program for the National Antimicrobial Resistance Monitoring
System. So we are a contributor to that.
Both the intramural and the extramural programs are also
focusing on the development of alternatives to the use of
antimicrobials in livestock rearing. Some of those projects
have focused on the development of vaccines for the pathogens.
Others are developing novel products that can be fed to animals
that would provide for growth promotion, but would not use or--
you know, essentially would replace antibiotics. And some of
these include pre- and probiotics and other active substances
that can be safely fed to animals, promote growth, but it would
substitute for the use of antibiotics.
So a new focus of research has been to understand, using
some of the new techniques of what is called the microbiome
approach--to understand the population ecology of
microorganisms in the gut of food animals, how those are
affected by feeding of antibiotics, and out of those studies to
try to identify what are some new and promising approaches that
can be used to develop alternatives that would, again, provide
for the growth promotion effects, but that would substitute for
the use of antibiotics that are now very important for human
medicine.
Dr. Bohman. May I add something on the economic side? So
ERS and NASS conduct an annual farm financial survey, the
Agricultural Resource Management Survey, and we have included
questions about farmers' uses of the antibiotics and have a
research program underway to look at the implications for costs
of farmers who do use antibiotics; for those who do and don't,
what are complementary strategies that they have been
employing; and we are building models to help understand the
implications of alternatives.
Dr. Ramaswamy. If I have the time, I could add one.
So within NIFA, the request for applications, we are going
to be doing a $5 million effort in antimicrobial resistance
area. And that is going to look at life cycle analysis, what
happens to farm animals from, in quotes, ``cradle to grave,''
as it were, looking at all of the different facets where you
might have the--critical control points where you might have
microbes coming in and going out, how do you deal with it.
In addition to that, you asked the question about outreach
itself. Our grant proposals will require that the knowledge
that is going to be developed is to be translated and delivered
to the end user as well. So the Cooperative Extension Service
involvement in this is a very critical piece of it.
Mr. Aderholt. Mr. Yoder.
PUBLICATION OF TAX PAYER-FUNDED RESEARCH
Mr. Yoder. Thank you, Mr. Chairman.
I just have a brief question about the publication of
taxpayer-funded research. And I am a cosponsor of legislation
in the House that would require research that was funded by
taxpayer dollars to be--that is published in a journal to be
published online after a certain period of time so that other
taxpayers and other taxpayer-funded entities, other
universities can access the research. And we are constantly
advising Federal agencies, universities to figure out how to do
more with less. This is an opportunity to save research dollars
across the universities in our country. So it is a very
positive bill, it is a bipartisan bill.
And I am pleased to see in February a memo from, or the
mandate from the President, I guess an administrative
directive, entitled Increasing Access to the Results of
Federally Funded Scientific Research was issued by the Office
of Science and Technology Policy on February 22, 2013.
I guess what I want to know is how are your respective
departments preparing to deal with this, and what does the
future look like in terms of access to research that is funded
through your departments?
Dr. Woteki. We are working with our colleagues in the other
science agencies to respond to the President's directive to
develop two plans by the end of August of this year. One on how
we would provide open access to scholarly publications that are
the result of the Federal investment in research, and secondly,
how we will provide public access to the data that were also
the result of federally funded research projects.
We are, as I said, working with the other science agencies,
the National Science Foundation, the National Institute of
Science and Technology, you know, across the board, and we will
be holding in a month's time essentially a workshop to get
opinions from researchers at universities, scientific societies
about the implementation of this directive from the President.
So it is a closely coordinated activity. We are very
mindful of the individual researcher in a university and the
need to have a coordinated approach, because that individual
agronomist or animal scientist may receive funding to support
research from the National Institute of Food and Agriculture,
perhaps from the National Science Foundation, perhaps from
other Federal agencies, and that any requirements that we place
on them have got to be ones that are going to be coordinated,
and that will have the least burden possible on the individual
investigators.
Mr. Yoder. And so that is certainly an important
consideration related to how the researchers have to provide
this information, and in particular in legislation that we were
pursuing, that research not published, then they don't have to
publish their works. There are certain rules regarding notes. I
know there is a lot of intricacies that go into it. Obviously
classified documents can't be produced, and we know there are
certain things that we are researching even regarding
bioterrorism and those sorts of things. So I appreciate your
sensitivity to that.
So you are working through that process. When would
taxpayers, constituents be able to research and be part of a
fully operating system? What would that timeline look like?
Dr. Woteki. Well, we have done some internal discussions
for the purposes of trying to answer that question of how long
would it take for us to have a system that would be up and
operable.
Given that we have been asked to develop a plan, we will be
submitting those plans, as I said, in the month of August, and
our expectation is that we would not be able to fully implement
a new system for probably 18 months beyond that. There will be
probably budgetary implications for the development of the IT
systems that would handle these new reporting requirements. We
would also have to allow the opportunity for the granting
agencies in their requests for applications to have the new
requirements specified.
So the new system would have to be phased in over time, get
the IT systems in place, and then also provide the time for the
appropriate notification in the grants, the new grants that
would be brought in under this new approach.
Mr. Yoder. Great. Thank you for your answer.
Dr. Ramaswamy. I might add just one quick thing. We did the
``back of the proverbial envelope'' calculation. We figured it
would cost $100 per publication to be made available in
perpetuity.
Mr. Yoder. Each time?
Dr. Ramaswamy. Yes, sir.
Mr. Yoder. Okay. Thank you.
Thank you, Mr. Chairman.
CENSUS OF AGRICULTURE
Mr. Aderholt. Dr. Clark, let me turn to you for just a
minute on the Census for Agriculture. I understand the 2012
Census of Agriculture is underway. Your agency is collecting
and compiling information received from producer surveys. Could
you give us just a quick overview and update on that, and also
what the response rate from the producers has been?
Dr. Clark. We are very pleased that we have a good response
rate at this point. We are at 69 percent. That is about 2
million of the 3 million that we have mailed. We have been able
to get 270,000 from our Web reporting, which is much more than
we expected. This will save us costs, because anything that
comes in through the Web does not have to go through a keying
operation, and we don't have to do the follow-up.
We just have had two follow-up mailings. So we finished our
mail data collection in March, and we are going to field
follow-up now for the important operations that we still want
to collect data from, the large operations, the minority farm
operations, the ones that we want to make sure that we meet our
coverage goals. And we will be calling counties that have less
than a 75 percent response within their county so that we can
provide an equitable amount of data for each of the counties in
the United States.
We have a unit in our operating center which we established
about 18 months ago in St. Louis that is working on the
editing. We may have some slowdown in the operations because we
only hired half the number of people that we had initially
planned to hire for this Census. We are down in our staffing
because of the budget reductions.
So we are still hoping that we will be able to publish our
results in February. The main things that we have had to change
because of sequestration and rescission include reducing--or
suspending the conduct of the Census in Guam, the Virgin
Islands, Samoa and the Northern Mariana Islands, and we will
not be producing two special products, ZIP code tabulations and
county profiles. But we were pleased that we did get the
anomaly, which was the additional funding to do the Census, to
do the data collection for the Census, but that was not at the
level that we had originally hoped for, so we did have to make
some accommodations in the Census.
Mr. Aderholt. Thank you.
Mr. Farr may have a follow-up question, so let me go ahead
and turn it over to you.
Mr. Farr. Why do it every 5 years? The national Census is
every 10 years.
Ms. Clark. Well, because agriculture changes a lot in the
interim. The Census of Agriculture is part of the economic
census of the United States. It started in the Census Bureau in
about 1840, and until 1997 was conducted as part--by the Census
Bureau. It was moved in 1997 to the Department of Agriculture,
and there have been some positive benefits of doing that.
Because of the integration between the Census of Agriculture
and the agriculture estimating programs, we have much better
coverage of our population because we now have a better list
frame that we use for both the census and also for agriculture
surveys.
So that is the rationale, and it is part of our economic
underpinnings for information and policy, which is needed on an
ongoing basis.
RESEARCH FUNDING
Mr. Farr. I have a question of Dr. Woteki. You have a $2.8
billion program, your four mission areas sitting next to you. I
couldn't figure out exactly because it is broken out in so many
different ways, but for your whole Department I would be
interested in seeing how much of the funding goes for
competitive grants in all of the departments, how much goes for
just formula funding, and how much is for in-house research.
That is sort of extracting, you know, the labor costs. If you
could break that out. I think I am always interested in moving
more of it to competitive, but I would just like to see what it
all is. I know it is pretty easy to see within the ARS, which
is about 50-50.
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SUSTAINABLE AGRICULTURE RESEARCH AND EXTENSION (SARE)
I have a concern. The President's budget last year included
individual requests for the SARE program. The requests were
separated into an extension component and research and
education component. This year the President's budget includes
a single request for $22.7 million for both.
What is the amount that you will--and I hope that we want
to keep them, both components, funded--what is the amount that
you will allocate for extension component and for research
component of the 22.7?
Dr. Ramaswamy. Congressman Farr, indeed we are proposing an
allocation of $22.7 million for the SARE program. You know, you
can't separate the research from the extension. We wanted to
bring it all under one line. In that amount we have a proposal
for an actual increase of almost $3 million compared to last
year.
Mr. Farr. For extension or for----
Dr. Ramaswamy. Well, complete integrated SARE program. When
you look at these things as being integrated, you cannot
separate the discovery process from the delivery process. At
the institutions and other organizations where SARE funding is
provided, researchers and extension folks, they all live and
work together. Sometimes it is the same individual that does
that work as well. So----
Mr. Farr. Well, often when you combine programs, you know,
one suffers at the expense of the other. They are both
important, as you pointed out. So I think that as long as you
are committing to keep both going----
Dr. Ramaswamy. Yes, sir. You have our commitment.
Absolutely. Positively.
Mr. Farr. All right. Well, I just want to conclude by just
saying I think this hearing has been, for me, of all the years
I have been on the Committee, this has been a very interesting
one. I could sit here all day, because I think of you as being
the brain trust for the information that Congress needs to set
policy.
But I have been very critical of the government the longer
I get here about how much of our information stays in academic
circles and in our traditional ways, and at the same time
society and sort of the--as the Secretary was talking about is
how do you initiate new people? If the average age of farmers
in the United States is 66 years old, where is the next
generation of farming coming? What are the kinds of policies?
And he was talking about using research lands that we are
giving up to allow start-up farms for veterans and things like
that. Those are the really exciting kinds of things that I
think Congress would be very interested in.
APPLICATION OF RESEARCH
I would just hope that in your areas, because you are all
policy wonks, is how do you take the data that you are doing
and apply it? We need the application process brought to us. We
got all this information. How are we going to get it out there
so it works? Because it is exciting stuff.
I love data, but I don't like data that is not applied, and
I think that is where we lack the thrust to do better
application of information that we have gained, particularly in
this health area. I mean, I think there is going to be a big
push to move wellness into the Department of Health, because I
think wellness is going to be the future of medicine in
America. We know a lot about disease; we are just beginning to
learn about what it takes to stay well and healthy.
So please push.
Mr. Aderholt. Mr. Fortenberry.
Mr. Fortenberry. Well, Congressman Farr is actually
anticipating some of my comments, because I wanted to go back
to our conversation, Dr. Woteki, about how we elevate the
stature of the Department in reviving, if you will, its past
and its integration into broader areas of society so that we
are extending good research and proper formation around things
that are good for people, the very purpose of which we have
these policies.
We have made some advances in the last few years,
particularly in the area of wellness. That whole word is now, I
think, a generally accepted term. It has been integrated into
workplaces in a lot of areas. There is an increased focus,
obviously, on the right balance for school lunches, although we
have got to make sure kids aren't hungry. Those are the primary
emails that I have gotten of late.
At the same time, again going back to our very prominent
past where we called things home economics, and we had really a
fuller program integrated into schools, I think, to your point,
new policy research should be built upon, again, the past,
because we already have a great body of knowledge that has
worked well in previous times, and we are under stresses
because of, again, sociological change as to how to adapt, but
I don't think we should be afraid either to talk about that
sociological change and how it is related to these outcomes in
health.
I completely agree with what Congressman Farr said. This
correlation between nutrition and health is, again, intuitive,
but there is a growing recognition that we must grasp this in a
serious manner and make it an integral part of broader policy
in the country. But you have already done that for well over
100 years.
So, again, elevating the role of the Department in the
arena, we are going to call it health, but, again, because of
the correlation between nutrition and health, to me is
absolutely essential.
NEW RESEARCH
It is related to the last point I wanted to make, and I
wanted everybody to respond to this right quick, and you are
welcome to respond directly to what I just said. But I like a
simple question that simply asks this: What is old that we can
get rid of that no longer makes sense, and what is new,
emerging trends where we need to be entrepreneurial and
creative in policy thinking, that actually address what the
underlying purposes of our whole expenditures are here, namely
a good, vibrant, healthy, economically sound country in order
that people can find the fullness of their capacity?
So, again, what is old that we need to let go of or
rethink, and what are emerging models that we need to focus on?
Dr. Wotecki. Well, very quickly, with respect to the what
is new that will also have an impact on the greater public as
well as on the design of programs is the small, but very
important initiative that is in the ERS budget, the $2.5
million that is focused on behavioral economics as well as the
use of administrative data to evaluate programs. That small
$2.5 million budgetary request is essentially a reorientation
of programs within ERS to pursue research that we think is
going to help develop those policy nudges to move the public in
the right direction.
Mr. Fortenberry. It is a very good point. Nudge is another
word. I think that will become the space, the public policy
space, or the word du jour in the public policy space as to how
we creatively think of policies that incentivize and are
consistent with what people would naturally desire in order to
achieve these outcomes.
Dr. Wotecki. Yes.
Mr. Fortenberry. Good. That is interesting.
Dr. Wotecki. And with respect to what is old, we do have
within the mission area and within each of the agencies a
periodic review of our programs, and this budget does reflect
the new directions in which we think our programs should be
going as well as a deemphasis on areas that are either mature
research, or in which the problem has been largely addressed
and that we think we need to reorient our funds towards higher-
priority projects.
Mr. Fortenberry. Well, in any organization, particularly in
a large one like yours, there is a tendency for stasis. It is
understandable in any large organization, because you have done
good work in the past, it has worked, it made sense, and there
is interest around it. But we all have to figure out ways to
deliver smart and effective government services while saving
money. That is just where we are. So thank you very much.
Mr. Aderholt. I know you wanted to hear from the rest of
them, but maybe they could submit that to the record and each
respond what the old and--what needs to be thrown out and what
needs to be looked at as new.
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Mr. Aderholt. Ms. Pingree.
APPLICATION OF RESEARCH
Ms. Pingree. Thank you, Mr. Chair. I know we are trying to
wrap up here, and I appreciate the chance just to make one last
what I think is a fairly brief comment to follow up on some of
what I was talking about in my last question. I do also want to
associate myself with the remarks of Mr. Farr. I think that it
is wonderful to have you all as a research brain trust, and it
has been very interesting for me to hear from all of you today.
Mr. Fortenberry, I just want to make sure that I concur
with you. Home economics was one of my favorite subjects in
school, and were we able to sponsor a bill to bring that back
in, I would be all in favor of that. I don't know how our
educational institutions would feel, but lots of great things
were learned in those areas that could apply.
Just to follow up, Mr. Farr was talking about the
challenges that we have about new farmers and sort of what the
future of agriculture is going to look like, and I always feel
lucky to be from Maine, which was once an agricultural
powerhouse State, and then it started to wane. But now we find
in our State statistically the average age of our farmers going
down, and the number of farms under cultivation is going up. We
are not still the Midwest or the blockbuster States, but it is
a nice trend to be watching. And I think a lot of it has to do
with some of the things I talk about a lot, which is the local
food and farming, the interest people have in where their food
comes from, healthier school lunches, buying more from farmers,
all kind of things that I think are a growing market, and a
growing opportunity, and a real trend in agriculture.
ANTIBIOTICS
Some of that comes from paying attention to what consumers'
concerns are. And I just wanted to kind of editorialize on the
issue I brought up earlier on antibiotics in animal feeds. It
is not the number one problem, it is not the only issue that we
are looking at, and I appreciate the fact that there is money
in the President's budget around alternatives, and you listed a
very long and helpful list of things that people are looking
at.
But I do want to say, since much of my attention is attuned
to what is in the popular press, what consumers are worried
about, there has been a lot of focus and attention both on the
area of food safety, but also the resistant antibiotics, and
then this issue about the overuse potentially in animal feeds.
I just want to make sure that as you are going through
that, that there really is a focus on best practices. You know,
I don't think the consumer is comforted by the idea of carcass
rinses. You know, I think that those are the things that make
people nervous; that we have a problem, and we try to scrub it
up, we try to think of a new drug, we try to just stick with
the same system. I really am not a scientist here, and I am not
even an agricultural scientist, but I know that some of it has
to do with our animal practices. Some of it has to do with
things that aren't allowed in other countries. Some of it are
about things that I think many young and new farmers don't want
to have to use a lot of antibiotics in their feed.
So I just hope that a lot of your research is also looking
at some of these ideas that in some ways go back to old ideas
or old practices that good farmers used, because that is really
what the consumer is looking for. Obviously, in the field of
organic agriculture and the growing interest in feeds and
without antibiotics in milk, that doesn't have antibiotics in a
lot of things, that consumers are asking for that; so also
helping farmers to understand what practices work well so that
the necessity isn't there unless there is a disease outbreak
and you have to use antibiotics.
So you listed a lot of things. I just wanted to make sure
that that is also high on your list as you are looking to
alternatives, and that you are hearing what consumer worries
are out there, because in the long run, that is where farmers
have their new markets and their profitable markets, and I
think they need to have the support and backing from you in the
work you do so that that is clearly out there.
I will close my remarks. Thank you again.
Thank you, Mr. Chairman.
Mr. Aderholt. Thank you, Ms. Pingree.
And that concludes our hearing for today. I thank each of
you for being here and your testimony. We look forward to
working with you as we proceed on with the fiscal year 2014
budget. Thank you.
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W I T N E S S E S
----------
Page
Bohman, Mary..................................................... 663
Clark, Cynthia................................................... 663
Gensler, Gary.................................................... 1
Glauber, Joseph.................................................. 393
Knipling, E. B................................................... 663
O'Malia, S. D.................................................... 1
Ramaswamy, Sonny................................................. 663
Vilsack, Hon. Thomas............................................. 393
Woteki, C. E..................................................... 663
Young, Michael.................................................393, 663